Correlation Between Naver and SK Bioscience

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

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

Diversification Opportunities for Naver and SK Bioscience

-0.36

Correlation Coefficient

Naver  SK Bioscience

Very good diversification

The 3 months correlation between Naver and 302440 is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Naver and SK Bioscience Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SK Bioscience 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 SK Bioscience. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SK Bioscience has no effect on the direction of Naver i.e., Naver and SK Bioscience go up and down completely randomly.

Pair Corralation between Naver and SK Bioscience

Assuming the 90 days trading horizon Naver is expected to generate 0.51 times more return on investment than SK Bioscience. However, Naver is 1.96 times less risky than SK Bioscience. It trades about 0.2 of its potential returns per unit of risk. SK Bioscience Co is currently generating about 0.03 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	Insignificant
Accuracy	100.0%
Values	Daily Returns

Naver  vs.  SK Bioscience 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.

SK Bioscience

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SK Bioscience Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, SK Bioscience may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Naver and SK Bioscience

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

The idea behind Naver and SK Bioscience 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.