Correlation Between Hankook Furniture and Naver
Can any of the company-specific risk be diversified away by investing in both Hankook Furniture 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 Hankook Furniture and Naver into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hankook Furniture Co and Naver, you can compare the effects of market volatilities on Hankook Furniture 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 Hankook Furniture with a short position of Naver. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hankook Furniture and Naver.
Diversification Opportunities for Hankook Furniture and Naver
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Hankook and Naver is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Hankook Furniture Co and Naver in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Naver and Hankook Furniture 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 Hankook Furniture Co 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 Hankook Furniture i.e., Hankook Furniture and Naver go up and down completely randomly.
Pair Corralation between Hankook Furniture and Naver
Assuming the 90 days trading horizon Hankook Furniture is expected to generate 2.64 times less return on investment than Naver. But when comparing it to its historical volatility, Hankook Furniture Co is 2.75 times less risky than Naver. It trades about 0.11 of its potential returns per unit of risk. Naver is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 19,770,000 in Naver on October 28, 2024 and sell it today you would earn a total of 630,000 from holding Naver or generate 3.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hankook Furniture Co vs. Naver
Performance |
| Timeline |
| Hankook Furniture |
| Naver |
Hankook Furniture and Naver Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hankook Furniture and Naver
The main advantage of trading using opposite Hankook Furniture and Naver positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hankook Furniture 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.| Hankook Furniture vs. Samsung Electronics Co | Hankook Furniture vs. Samsung Electronics Co | Hankook Furniture vs. KB Financial Group | Hankook Furniture vs. Shinhan Financial Group |
| Naver vs. EV Advanced Material | Naver vs. INNOX Advanced Materials | Naver vs. Kolon Plastics | Naver vs. Daejoo Electronic Materials |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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