Correlation Between Naver and Furonteer

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

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

Diversification Opportunities for Naver and Furonteer

0.69

Correlation Coefficient

Naver  Furonteer

Poor diversification

The 3 months correlation between Naver and Furonteer is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Naver and Furonteer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Furonteer 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 Furonteer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Furonteer has no effect on the direction of Naver i.e., Naver and Furonteer go up and down completely randomly.

Pair Corralation between Naver and Furonteer

Assuming the 90 days trading horizon Naver is expected to generate 0.39 times more return on investment than Furonteer. However, Naver is 2.58 times less risky than Furonteer. It trades about 0.08 of its potential returns per unit of risk. Furonteer is currently generating about 0.0 per unit of risk. If you would invest  19,560,000  in Naver on September 27, 2024 and sell it today you would earn a total of  690,000  from holding Naver or generate 3.53% return on investment over 90 days.

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

Naver  vs.  Furonteer

Naver

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Naver are ranked lower than 11 (%) 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.

Furonteer

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Furonteer are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Furonteer sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Naver and Furonteer

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

The idea behind Naver and Furonteer 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.