Correlation Between Haitai Confectionery and Naver

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

By analyzing existing cross correlation between Haitai Confectionery Foods and Naver, you can compare the effects of market volatilities on Haitai Confectionery and Naver 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 Haitai Confectionery with a short position of Naver. Check out your portfolio center. Please also check ongoing floating volatility patterns of Haitai Confectionery and Naver.

Diversification Opportunities for Haitai Confectionery and Naver

0.37

Correlation Coefficient

Haitai Confectionery  Naver

Weak diversification

The 3 months correlation between Haitai and Naver is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Haitai Confectionery Foods and Naver in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Naver and Haitai Confectionery 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 Haitai Confectionery Foods are associated (or correlated) with Naver. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Naver has no effect on the direction of Haitai Confectionery i.e., Haitai Confectionery and Naver go up and down completely randomly.

Pair Corralation between Haitai Confectionery and Naver

Assuming the 90 days trading horizon Haitai Confectionery Foods is expected to generate 0.81 times more return on investment than Naver. However, Haitai Confectionery Foods is 1.23 times less risky than Naver. It trades about 0.1 of its potential returns per unit of risk. Naver is currently generating about 0.03 per unit of risk. If you would invest  551,962  in Haitai Confectionery Foods on December 1, 2024 and sell it today you would earn a total of  54,038  from holding Haitai Confectionery Foods or generate 9.79% return on investment over 90 days.

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

Haitai Confectionery Foods  vs.  Naver

Haitai Confectionery

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Haitai Confectionery Foods are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Haitai Confectionery may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Naver

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Naver are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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.

Pair Trading with Haitai Confectionery and Naver

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

The idea behind Haitai Confectionery Foods and Naver 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.