Correlation Between YG Entertainment and Top Material

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

By analyzing existing cross correlation between YG Entertainment and Top Material Co, you can compare the effects of market volatilities on YG Entertainment and Top Material 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 YG Entertainment with a short position of Top Material. Check out your portfolio center. Please also check ongoing floating volatility patterns of YG Entertainment and Top Material.

Diversification Opportunities for YG Entertainment and Top Material

0.51

Correlation Coefficient

YG Entertainment  Top Material

Very weak diversification

The 3 months correlation between 122870 and Top is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding YG Entertainment and Top Material Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Top Material and YG Entertainment 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 YG Entertainment are associated (or correlated) with Top Material. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Top Material has no effect on the direction of YG Entertainment i.e., YG Entertainment and Top Material go up and down completely randomly.

Pair Corralation between YG Entertainment and Top Material

Assuming the 90 days trading horizon YG Entertainment is expected to generate 0.48 times more return on investment than Top Material. However, YG Entertainment is 2.09 times less risky than Top Material. It trades about 0.22 of its potential returns per unit of risk. Top Material Co is currently generating about 0.04 per unit of risk. If you would invest  4,580,000  in YG Entertainment on December 30, 2024 and sell it today you would earn a total of  1,770,000  from holding YG Entertainment or generate 38.65% return on investment over 90 days.

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

YG Entertainment  vs.  Top Material Co

YG Entertainment

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in YG Entertainment are ranked lower than 17 (%) 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.

Top Material

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Top Material Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Top Material may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with YG Entertainment and Top Material

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

The idea behind YG Entertainment and Top Material Co 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.