Correlation Between Naver and Home Center

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

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

Diversification Opportunities for Naver and Home Center

0.31

Correlation Coefficient

Naver  Home Center

Weak diversification

The 3 months correlation between Naver and Home is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Naver and Home Center Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Home Center Holdings 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 Home Center. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Home Center Holdings has no effect on the direction of Naver i.e., Naver and Home Center go up and down completely randomly.

Pair Corralation between Naver and Home Center

Assuming the 90 days trading horizon Naver is expected to generate 0.44 times more return on investment than Home Center. However, Naver is 2.29 times less risky than Home Center. It trades about 0.05 of its potential returns per unit of risk. Home Center Holdings is currently generating about 0.0 per unit of risk. If you would invest  20,001,900  in Naver on December 23, 2024 and sell it today you would earn a total of  948,100  from holding Naver or generate 4.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	72.41%
Values	Daily Returns

Naver  vs.  Home Center Holdings

Naver

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Naver are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Naver may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Home Center Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Home Center Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Home Center 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 Home Center

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

The idea behind Naver and Home Center Holdings 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.