Correlation Between Naver and Posco Chemical
Can any of the company-specific risk be diversified away by investing in both Naver and Posco Chemical 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 Posco Chemical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Naver and Posco Chemical Co, you can compare the effects of market volatilities on Naver and Posco Chemical 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 Posco Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Naver and Posco Chemical.
Diversification Opportunities for Naver and Posco Chemical
-0.83 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Naver and Posco is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding Naver and Posco Chemical Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Posco Chemical 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 Posco Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Posco Chemical has no effect on the direction of Naver i.e., Naver and Posco Chemical go up and down completely randomly.
Pair Corralation between Naver and Posco Chemical
Assuming the 90 days trading horizon Naver is expected to generate 0.5 times more return on investment than Posco Chemical. However, Naver is 1.99 times less risky than Posco Chemical. It trades about 0.3 of its potential returns per unit of risk. Posco Chemical Co is currently generating about -0.21 per unit of risk. If you would invest 17,140,000 in Naver on September 13, 2024 and sell it today you would earn a total of 4,660,000 from holding Naver or generate 27.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Naver vs. Posco Chemical Co
Performance |
| Timeline |
| Naver |
| Posco Chemical |
Naver and Posco Chemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Naver and Posco Chemical
The main advantage of trading using opposite Naver and Posco Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Naver position performs unexpectedly, Posco Chemical 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 Posco Chemical will offset losses from the drop in Posco Chemical's long position.| Naver vs. Duksan Hi Metal | Naver vs. Daiyang Metal Co | Naver vs. Hanjoo Light Metal | Naver vs. KB Financial Group |
| Posco Chemical vs. Dong A Steel Technology | Posco Chemical vs. Netmarble Games Corp | Posco Chemical vs. Guyoung Technology Co | Posco Chemical vs. Hwangkum Steel Technology |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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