Correlation Between Naver and Celltrion Pharm

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

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

Diversification Opportunities for Naver and Celltrion Pharm

-0.68

Correlation Coefficient

Naver  Celltrion Pharm

Excellent diversification

The 3 months correlation between Naver and Celltrion is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Naver and Celltrion Pharm in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Celltrion Pharm 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 Celltrion Pharm. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Celltrion Pharm has no effect on the direction of Naver i.e., Naver and Celltrion Pharm go up and down completely randomly.

Pair Corralation between Naver and Celltrion Pharm

Assuming the 90 days trading horizon Naver is expected to under-perform the Celltrion Pharm. But the stock apears to be less risky and, when comparing its historical volatility, Naver is 1.66 times less risky than Celltrion Pharm. The stock trades about -0.1 of its potential returns per unit of risk. The Celltrion Pharm is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  5,504,762  in Celltrion Pharm on October 4, 2024 and sell it today you would earn a total of  165,238  from holding Celltrion Pharm or generate 3.0% return on investment over 90 days.

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

Naver  vs.  Celltrion Pharm

Naver

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Naver are ranked lower than 10 (%) 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.

Celltrion Pharm

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Celltrion Pharm has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Naver and Celltrion Pharm

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

The idea behind Naver and Celltrion Pharm 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..