Correlation Between Next Entertainment and JYP Entertainment

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

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

Diversification Opportunities for Next Entertainment and JYP Entertainment

-0.5

Correlation Coefficient

Next Entertainment  JYP Entertainment

Very good diversification

The 3 months correlation between Next and JYP is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Next Entertainment World 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 Next 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 Next Entertainment World 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 Next Entertainment i.e., Next Entertainment and JYP Entertainment go up and down completely randomly.

Pair Corralation between Next Entertainment and JYP Entertainment

Assuming the 90 days trading horizon Next Entertainment World is expected to under-perform the JYP Entertainment. In addition to that, Next Entertainment is 1.05 times more volatile than JYP Entertainment Corp. It trades about -0.07 of its total potential returns per unit of risk. JYP Entertainment Corp is currently generating about 0.06 per unit of volatility. If you would invest  5,640,000  in JYP Entertainment Corp on October 8, 2024 and sell it today you would earn a total of  1,140,000  from holding JYP Entertainment Corp or generate 20.21% return on investment over 90 days.

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

Next Entertainment World  vs.  JYP Entertainment Corp

Next Entertainment World

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Next Entertainment World 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 February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

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 Next Entertainment and JYP Entertainment

The main advantage of trading using opposite Next Entertainment and JYP Entertainment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Next Entertainment 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 Next Entertainment World 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.