Correlation Between KCC Engineering and JYP Entertainment

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Can any of the company-specific risk be diversified away by investing in both KCC Engineering 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 KCC Engineering and JYP Entertainment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between KCC Engineering Construction and JYP Entertainment Corp, you can compare the effects of market volatilities on KCC Engineering 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 KCC Engineering with a short position of JYP Entertainment. Check out your portfolio center. Please also check ongoing floating volatility patterns of KCC Engineering and JYP Entertainment.

Diversification Opportunities for KCC Engineering and JYP Entertainment

-0.66
  Correlation Coefficient

Excellent diversification

The 3 months correlation between KCC and JYP is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding KCC Engineering Construction 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 KCC Engineering 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 KCC Engineering Construction 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 KCC Engineering i.e., KCC Engineering and JYP Entertainment go up and down completely randomly.

Pair Corralation between KCC Engineering and JYP Entertainment

Assuming the 90 days trading horizon KCC Engineering Construction is expected to generate 0.29 times more return on investment than JYP Entertainment. However, KCC Engineering Construction is 3.47 times less risky than JYP Entertainment. It trades about 0.15 of its potential returns per unit of risk. JYP Entertainment Corp is currently generating about -0.05 per unit of risk. If you would invest  394,312  in KCC Engineering Construction on October 14, 2024 and sell it today you would earn a total of  10,188  from holding KCC Engineering Construction or generate 2.58% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

KCC Engineering Construction  vs.  JYP Entertainment Corp

 Performance 
       Timeline  
KCC Engineering Cons 

Risk-Adjusted Performance

0 of 100

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

Risk-Adjusted Performance

14 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in JYP Entertainment Corp are ranked lower than 14 (%) 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.

KCC Engineering and JYP Entertainment Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with KCC Engineering and JYP Entertainment

The main advantage of trading using opposite KCC Engineering and JYP Entertainment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KCC Engineering 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 KCC Engineering Construction 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.

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