Correlation Between Chinyang Hold and YG Entertainment

Can any of the company-specific risk be diversified away by investing in both Chinyang Hold and YG Entertainment at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Chinyang Hold and YG Entertainment into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Chinyang Hold and YG Entertainment, you can compare the effects of market volatilities on Chinyang Hold and YG Entertainment and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Chinyang Hold with a short position of YG Entertainment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chinyang Hold and YG Entertainment.

Diversification Opportunities for Chinyang Hold and YG Entertainment

-0.27

Correlation Coefficient

Chinyang Hold  YG Entertainment

Very good diversification

The 3 months correlation between Chinyang and 122870 is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Chinyang Hold and YG Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on YG Entertainment and Chinyang Hold is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Chinyang Hold are associated (or correlated) with YG Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of YG Entertainment has no effect on the direction of Chinyang Hold i.e., Chinyang Hold and YG Entertainment go up and down completely randomly.

Pair Corralation between Chinyang Hold and YG Entertainment

Assuming the 90 days trading horizon Chinyang Hold is expected to under-perform the YG Entertainment. But the stock apears to be less risky and, when comparing its historical volatility, Chinyang Hold is 2.8 times less risky than YG Entertainment. The stock trades about -0.02 of its potential returns per unit of risk. The YG Entertainment is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  4,550,000  in YG Entertainment on December 26, 2024 and sell it today you would earn a total of  2,090,000  from holding YG Entertainment or generate 45.93% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.28%
Values	Daily Returns

Chinyang Hold  vs.  YG Entertainment

Chinyang Hold

Risk-Adjusted Performance

Very Weak

Over the last 90 days Chinyang Hold has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Chinyang Hold is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

YG Entertainment

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in YG Entertainment are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, YG Entertainment sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Chinyang Hold and YG Entertainment

The main advantage of trading using opposite Chinyang Hold and YG Entertainment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chinyang Hold position performs unexpectedly, YG Entertainment can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in YG Entertainment will offset losses from the drop in YG Entertainment's long position.

The idea behind Chinyang Hold and YG Entertainment pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.