Correlation Between JYP Entertainment and Kosdaq Composite

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

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

Diversification Opportunities for JYP Entertainment and Kosdaq Composite

-0.84

Correlation Coefficient

JYP Entertainment  Kosdaq Composite

Pay attention - limited upside

The 3 months correlation between JYP and Kosdaq is -0.84. Overlapping area represents the amount of risk that can be diversified away by holding JYP Entertainment Corp and Kosdaq Composite Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kosdaq Composite Index and JYP 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 JYP Entertainment Corp are associated (or correlated) with Kosdaq Composite. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kosdaq Composite Index has no effect on the direction of JYP Entertainment i.e., JYP Entertainment and Kosdaq Composite go up and down completely randomly.

Pair Corralation between JYP Entertainment and Kosdaq Composite

Assuming the 90 days trading horizon JYP Entertainment Corp is expected to generate 1.81 times more return on investment than Kosdaq Composite. However, JYP Entertainment is 1.81 times more volatile than Kosdaq Composite Index. It trades about 0.17 of its potential returns per unit of risk. Kosdaq Composite Index is currently generating about -0.12 per unit of risk. If you would invest  5,100,000  in JYP Entertainment Corp on September 27, 2024 and sell it today you would earn a total of  1,730,000  from holding JYP Entertainment Corp or generate 33.92% return on investment over 90 days.

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

JYP Entertainment Corp  vs.  Kosdaq Composite Index

Pair Trading with JYP Entertainment and Kosdaq Composite

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

The idea behind JYP Entertainment Corp and Kosdaq Composite Index 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.