Correlation Between YG Entertainment and Ray Co

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

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

Diversification Opportunities for YG Entertainment and Ray Co

-0.78

Correlation Coefficient

YG Entertainment  Ray Co

Pay attention - limited upside

The 3 months correlation between 122870 and Ray is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding YG Entertainment and Ray Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ray Co 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 Ray Co. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ray Co has no effect on the direction of YG Entertainment i.e., YG Entertainment and Ray Co go up and down completely randomly.

Pair Corralation between YG Entertainment and Ray Co

Assuming the 90 days trading horizon YG Entertainment is expected to under-perform the Ray Co. But the stock apears to be less risky and, when comparing its historical volatility, YG Entertainment is 1.39 times less risky than Ray Co. The stock trades about -0.11 of its potential returns per unit of risk. The Ray Co is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  615,000  in Ray Co on September 27, 2024 and sell it today you would lose (23,000) from holding Ray Co or give up 3.74% of portfolio value over 90 days.

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

YG Entertainment  vs.  Ray Co

YG Entertainment

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in YG Entertainment are ranked lower than 9 (%) 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.

Ray Co

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ray Co 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.

Pair Trading with YG Entertainment and Ray Co

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

The idea behind YG Entertainment and Ray Co 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..