Correlation Between Naver and Pyung Hwa

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

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

Diversification Opportunities for Naver and Pyung Hwa

0.66

Correlation Coefficient

Naver  Pyung Hwa

Poor diversification

The 3 months correlation between Naver and Pyung is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Naver and Pyung Hwa Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pyung Hwa Industrial 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 Pyung Hwa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pyung Hwa Industrial has no effect on the direction of Naver i.e., Naver and Pyung Hwa go up and down completely randomly.

Pair Corralation between Naver and Pyung Hwa

Assuming the 90 days trading horizon Naver is expected to under-perform the Pyung Hwa. But the stock apears to be less risky and, when comparing its historical volatility, Naver is 2.79 times less risky than Pyung Hwa. The stock trades about 0.0 of its potential returns per unit of risk. The Pyung Hwa Industrial is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  89,000  in Pyung Hwa Industrial on December 29, 2024 and sell it today you would earn a total of  18,200  from holding Pyung Hwa Industrial or generate 20.45% return on investment over 90 days.

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

Naver  vs.  Pyung Hwa Industrial

Naver

Risk-Adjusted Performance

Very Weak

Over the last 90 days Naver has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Naver is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pyung Hwa Industrial

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Pyung Hwa Industrial are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Pyung Hwa sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Naver and Pyung Hwa

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

The idea behind Naver and Pyung Hwa Industrial 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.