Correlation Between JYP Entertainment and Echomarketing CoLtd

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

By analyzing existing cross correlation between JYP Entertainment and Echomarketing CoLtd, you can compare the effects of market volatilities on JYP Entertainment and Echomarketing CoLtd 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 Echomarketing CoLtd. Check out your portfolio center. Please also check ongoing floating volatility patterns of JYP Entertainment and Echomarketing CoLtd.

Diversification Opportunities for JYP Entertainment and Echomarketing CoLtd

-0.58

Correlation Coefficient

JYP Entertainment  Echomarketing CoLtd

Excellent diversification

The 3 months correlation between JYP and Echomarketing is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding JYP Entertainment and Echomarketing CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Echomarketing CoLtd 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 are associated (or correlated) with Echomarketing CoLtd. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Echomarketing CoLtd has no effect on the direction of JYP Entertainment i.e., JYP Entertainment and Echomarketing CoLtd go up and down completely randomly.

Pair Corralation between JYP Entertainment and Echomarketing CoLtd

Assuming the 90 days trading horizon JYP Entertainment is expected to generate 0.95 times more return on investment than Echomarketing CoLtd. However, JYP Entertainment is 1.05 times less risky than Echomarketing CoLtd. It trades about 0.26 of its potential returns per unit of risk. Echomarketing CoLtd is currently generating about -0.01 per unit of risk. If you would invest  4,600,000  in JYP Entertainment on September 12, 2024 and sell it today you would earn a total of  2,500,000  from holding JYP Entertainment or generate 54.35% return on investment over 90 days.

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

JYP Entertainment  vs.  Echomarketing CoLtd

JYP Entertainment

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in JYP Entertainment are ranked lower than 20 (%) 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.

Echomarketing CoLtd

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Echomarketing CoLtd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Echomarketing CoLtd is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with JYP Entertainment and Echomarketing CoLtd

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

The idea behind JYP Entertainment and Echomarketing CoLtd 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.