Correlation Between JYP Entertainment and LG Chem
Can any of the company-specific risk be diversified away by investing in both JYP Entertainment and LG Chem 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 LG Chem 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 LG Chem, you can compare the effects of market volatilities on JYP Entertainment and LG Chem 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 LG Chem. Check out your portfolio center. Please also check ongoing floating volatility patterns of JYP Entertainment and LG Chem.
Diversification Opportunities for JYP Entertainment and LG Chem
-0.79 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between JYP and 051915 is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding JYP Entertainment Corp and LG Chem in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LG Chem 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 LG Chem. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LG Chem has no effect on the direction of JYP Entertainment i.e., JYP Entertainment and LG Chem go up and down completely randomly.
Pair Corralation between JYP Entertainment and LG Chem
Assuming the 90 days trading horizon JYP Entertainment Corp is expected to generate 1.81 times more return on investment than LG Chem. However, JYP Entertainment is 1.81 times more volatile than LG Chem. It trades about 0.1 of its potential returns per unit of risk. LG Chem is currently generating about -0.1 per unit of risk. If you would invest 7,230,000 in JYP Entertainment Corp on October 20, 2024 and sell it today you would earn a total of 410,000 from holding JYP Entertainment Corp or generate 5.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
JYP Entertainment Corp vs. LG Chem
Performance |
| Timeline |
| JYP Entertainment Corp |
| LG Chem |
JYP Entertainment and LG Chem Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with JYP Entertainment and LG Chem
The main advantage of trading using opposite JYP Entertainment and LG Chem positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JYP Entertainment position performs unexpectedly, LG Chem 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 LG Chem will offset losses from the drop in LG Chem's long position.| JYP Entertainment vs. Shinsegae Food | JYP Entertainment vs. Haitai Confectionery Foods | JYP Entertainment vs. FoodNamoo | JYP Entertainment vs. Youl Chon Chemical |
| LG Chem vs. SK Chemicals Co | LG Chem vs. Innowireless Co | LG Chem vs. Organic Special Pet | LG Chem vs. Seoul Food Industrial |
Check out your portfolio center.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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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