Correlation Between Narae Nanotech and Raontech

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

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

Diversification Opportunities for Narae Nanotech and Raontech

0.66

Correlation Coefficient

Narae Nanotech  Raontech

Poor diversification

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

Pair Corralation between Narae Nanotech and Raontech

Assuming the 90 days trading horizon Narae Nanotech Corp is expected to under-perform the Raontech. But the stock apears to be less risky and, when comparing its historical volatility, Narae Nanotech Corp is 1.11 times less risky than Raontech. The stock trades about -0.24 of its potential returns per unit of risk. The Raontech is currently generating about -0.18 of returns per unit of risk over similar time horizon. If you would invest  363,500  in Raontech on December 25, 2024 and sell it today you would lose (109,500) from holding Raontech or give up 30.12% of portfolio value over 90 days.

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

Narae Nanotech Corp  vs.  Raontech

Narae Nanotech Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Narae Nanotech Corp 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 April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Raontech

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Narae Nanotech and Raontech

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

The idea behind Narae Nanotech Corp and Raontech 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.