Correlation Between Sabio Holdings and NAVER Corp

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

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

Diversification Opportunities for Sabio Holdings and NAVER Corp

0.58

Correlation Coefficient

Sabio Holdings  NAVER Corp

Very weak diversification

The 3 months correlation between Sabio and NAVER is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Sabio Holdings and NAVER Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NAVER Corp and Sabio Holdings 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 Sabio Holdings are associated (or correlated) with NAVER Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NAVER Corp has no effect on the direction of Sabio Holdings i.e., Sabio Holdings and NAVER Corp go up and down completely randomly.

Pair Corralation between Sabio Holdings and NAVER Corp

Assuming the 90 days horizon Sabio Holdings is expected to generate 59.95 times more return on investment than NAVER Corp. However, Sabio Holdings is 59.95 times more volatile than NAVER Corp. It trades about 0.11 of its potential returns per unit of risk. NAVER Corp is currently generating about 0.13 per unit of risk. If you would invest  32.00  in Sabio Holdings on December 28, 2024 and sell it today you would earn a total of  10.00  from holding Sabio Holdings or generate 31.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.36%
Values	Daily Returns

Sabio Holdings  vs.  NAVER Corp

Sabio Holdings

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sabio Holdings are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating basic indicators, Sabio Holdings reported solid returns over the last few months and may actually be approaching a breakup point.

NAVER Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NAVER Corp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable fundamental indicators, NAVER Corp is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Sabio Holdings and NAVER Corp

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

The idea behind Sabio Holdings and NAVER Corp 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.