Correlation Between Naver and Kg Chemical

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

By analyzing existing cross correlation between Naver and Kg Chemical, you can compare the effects of market volatilities on Naver and Kg Chemical 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 Naver with a short position of Kg Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Naver and Kg Chemical.

Diversification Opportunities for Naver and Kg Chemical

-0.24

Correlation Coefficient

Naver  Kg Chemical

Very good diversification

The 3 months correlation between Naver and 001390 is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Naver and Kg Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kg Chemical and Naver 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 Naver are associated (or correlated) with Kg Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kg Chemical has no effect on the direction of Naver i.e., Naver and Kg Chemical go up and down completely randomly.

Pair Corralation between Naver and Kg Chemical

Assuming the 90 days trading horizon Naver is expected to generate 2.98 times less return on investment than Kg Chemical. But when comparing it to its historical volatility, Naver is 1.87 times less risky than Kg Chemical. It trades about 0.01 of its potential returns per unit of risk. Kg Chemical is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  450,627  in Kg Chemical on October 24, 2024 and sell it today you would lose (59,627) from holding Kg Chemical or give up 13.23% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.59%
Values	Daily Returns

Naver  vs.  Kg Chemical

Naver

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Naver are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Naver sustained solid returns over the last few months and may actually be approaching a breakup point.

Kg Chemical

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Kg Chemical are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Kg Chemical is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Naver and Kg Chemical

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

The idea behind Naver and Kg Chemical 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.

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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.