Correlation Between YG Entertainment and Oriental Precision

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

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

Diversification Opportunities for YG Entertainment and Oriental Precision

0.64

Correlation Coefficient

YG Entertainment  Oriental Precision

Poor diversification

The 3 months correlation between 122870 and Oriental is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding YG Entertainment and Oriental Precision Engineering in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oriental Precision 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 Oriental Precision. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oriental Precision has no effect on the direction of YG Entertainment i.e., YG Entertainment and Oriental Precision go up and down completely randomly.

Pair Corralation between YG Entertainment and Oriental Precision

Assuming the 90 days trading horizon YG Entertainment is expected to generate 5.33 times less return on investment than Oriental Precision. In addition to that, YG Entertainment is 1.07 times more volatile than Oriental Precision Engineering. It trades about 0.01 of its total potential returns per unit of risk. Oriental Precision Engineering is currently generating about 0.07 per unit of volatility. If you would invest  228,363  in Oriental Precision Engineering on September 22, 2024 and sell it today you would earn a total of  297,637  from holding Oriental Precision Engineering or generate 130.34% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.79%
Values	Daily Returns

YG Entertainment  vs.  Oriental Precision Engineering

YG Entertainment

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in YG Entertainment are ranked lower than 16 (%) 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.

Oriental Precision

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Oriental Precision Engineering are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Oriental Precision sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with YG Entertainment and Oriental Precision

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

The idea behind YG Entertainment and Oriental Precision Engineering 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.