Correlation Between EV Advanced and YG Entertainment

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

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

Diversification Opportunities for EV Advanced and YG Entertainment

-0.71

Correlation Coefficient

EV Advanced  YG Entertainment

Pay attention - limited upside

The 3 months correlation between 131400 and 122870 is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding EV Advanced Material and YG Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on YG Entertainment and EV Advanced 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 EV Advanced Material 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 EV Advanced i.e., EV Advanced and YG Entertainment go up and down completely randomly.

Pair Corralation between EV Advanced and YG Entertainment

Assuming the 90 days trading horizon EV Advanced Material is expected to under-perform the YG Entertainment. In addition to that, EV Advanced is 1.37 times more volatile than YG Entertainment. It trades about -0.04 of its total potential returns per unit of risk. YG Entertainment is currently generating about 0.0 per unit of volatility. If you would invest  5,347,623  in YG Entertainment on September 21, 2024 and sell it today you would lose (667,623) from holding YG Entertainment or give up 12.48% of portfolio value over 90 days.

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

EV Advanced Material  vs.  YG Entertainment

EV Advanced Material

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EV Advanced Material has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

YG Entertainment

Risk-Adjusted Performance

17 of 100

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.

Pair Trading with EV Advanced and YG Entertainment

The main advantage of trading using opposite EV Advanced and YG Entertainment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EV Advanced 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 EV Advanced Material 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.

Check out your portfolio center.

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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.