Correlation Between Naver and Ni Steel

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

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

Diversification Opportunities for Naver and Ni Steel

-0.62

Correlation Coefficient

Naver  Ni Steel

Excellent diversification

The 3 months correlation between Naver and 008260 is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Naver and Ni Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ni Steel 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 Ni Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ni Steel has no effect on the direction of Naver i.e., Naver and Ni Steel go up and down completely randomly.

Pair Corralation between Naver and Ni Steel

Assuming the 90 days trading horizon Naver is expected to generate 1.03 times more return on investment than Ni Steel. However, Naver is 1.03 times more volatile than Ni Steel. It trades about 0.02 of its potential returns per unit of risk. Ni Steel is currently generating about -0.07 per unit of risk. If you would invest  19,990,000  in Naver on October 22, 2024 and sell it today you would earn a total of  510,000  from holding Naver or generate 2.55% return on investment over 90 days.

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

Naver  vs.  Ni Steel

Naver

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Naver are ranked lower than 13 (%) 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.

Ni Steel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ni Steel has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Naver and Ni Steel

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

The idea behind Naver and Ni Steel 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..