Correlation Between Haitai Confectionery and JYP Entertainment

Can any of the company-specific risk be diversified away by investing in both Haitai Confectionery and JYP 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 Haitai Confectionery and JYP Entertainment into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Haitai Confectionery Foods and JYP Entertainment Corp, you can compare the effects of market volatilities on Haitai Confectionery and JYP 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 Haitai Confectionery with a short position of JYP Entertainment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Haitai Confectionery and JYP Entertainment.

Diversification Opportunities for Haitai Confectionery and JYP Entertainment

0.35

Correlation Coefficient

Haitai Confectionery  JYP Entertainment

Weak diversification

The 3 months correlation between Haitai and JYP is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Haitai Confectionery Foods and JYP Entertainment Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JYP Entertainment Corp and Haitai Confectionery 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 Haitai Confectionery Foods are associated (or correlated) with JYP Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JYP Entertainment Corp has no effect on the direction of Haitai Confectionery i.e., Haitai Confectionery and JYP Entertainment go up and down completely randomly.

Pair Corralation between Haitai Confectionery and JYP Entertainment

Assuming the 90 days trading horizon Haitai Confectionery Foods is expected to generate 1.09 times more return on investment than JYP Entertainment. However, Haitai Confectionery is 1.09 times more volatile than JYP Entertainment Corp. It trades about 0.04 of its potential returns per unit of risk. JYP Entertainment Corp is currently generating about -0.02 per unit of risk. If you would invest  521,943  in Haitai Confectionery Foods on October 9, 2024 and sell it today you would earn a total of  89,057  from holding Haitai Confectionery Foods or generate 17.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Haitai Confectionery Foods  vs.  JYP Entertainment Corp

Haitai Confectionery

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Haitai Confectionery Foods are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Haitai Confectionery may actually be approaching a critical reversion point that can send shares even higher in February 2025.

JYP Entertainment Corp

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in JYP Entertainment Corp are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, JYP Entertainment sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Haitai Confectionery and JYP Entertainment

The main advantage of trading using opposite Haitai Confectionery and JYP Entertainment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Haitai Confectionery position performs unexpectedly, JYP 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 JYP Entertainment will offset losses from the drop in JYP Entertainment's long position.

The idea behind Haitai Confectionery Foods and JYP Entertainment Corp 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.