Correlation Between Naver and AfreecaTV
Can any of the company-specific risk be diversified away by investing in both Naver and AfreecaTV 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 AfreecaTV into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Naver and AfreecaTV Co, you can compare the effects of market volatilities on Naver and AfreecaTV 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 AfreecaTV. Check out your portfolio center. Please also check ongoing floating volatility patterns of Naver and AfreecaTV.
Diversification Opportunities for Naver and AfreecaTV
Very good diversification
The 3 months correlation between Naver and AfreecaTV is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Naver and AfreecaTV Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AfreecaTV 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 AfreecaTV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AfreecaTV has no effect on the direction of Naver i.e., Naver and AfreecaTV go up and down completely randomly.
Pair Corralation between Naver and AfreecaTV
Assuming the 90 days trading horizon Naver is expected to generate 0.67 times more return on investment than AfreecaTV. However, Naver is 1.49 times less risky than AfreecaTV. It trades about 0.25 of its potential returns per unit of risk. AfreecaTV Co is currently generating about 0.13 per unit of risk. If you would invest 17,210,000 in Naver on August 25, 2024 and sell it today you would earn a total of 1,790,000 from holding Naver or generate 10.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Naver vs. AfreecaTV Co
Performance |
| Timeline |
| Naver |
| AfreecaTV |
Naver and AfreecaTV Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Naver and AfreecaTV
The main advantage of trading using opposite Naver and AfreecaTV positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Naver position performs unexpectedly, AfreecaTV 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 AfreecaTV will offset losses from the drop in AfreecaTV's long position.The idea behind Naver and AfreecaTV Co 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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