Correlation Between Naver and ISU Abxis

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

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

Diversification Opportunities for Naver and ISU Abxis

-0.91

Correlation Coefficient

Naver  ISU Abxis

Pay attention - limited upside

The 3 months correlation between Naver and ISU is -0.91. Overlapping area represents the amount of risk that can be diversified away by holding Naver and ISU Abxis Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ISU Abxis 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 ISU Abxis. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ISU Abxis has no effect on the direction of Naver i.e., Naver and ISU Abxis go up and down completely randomly.

Pair Corralation between Naver and ISU Abxis

Assuming the 90 days trading horizon Naver is expected to generate 0.77 times more return on investment than ISU Abxis. However, Naver is 1.3 times less risky than ISU Abxis. It trades about 0.2 of its potential returns per unit of risk. ISU Abxis Co is currently generating about -0.22 per unit of risk. If you would invest  16,670,000  in Naver on September 22, 2024 and sell it today you would earn a total of  4,330,000  from holding Naver or generate 25.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	98.41%
Values	Daily Returns

Naver  vs.  ISU Abxis Co

Naver

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Naver are ranked lower than 15 (%) 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.

ISU Abxis

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ISU Abxis Co 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 January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Naver and ISU Abxis

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

The idea behind Naver and ISU Abxis Co 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.