Correlation Between Gyeongnam Steel and Naver
Can any of the company-specific risk be diversified away by investing in both Gyeongnam Steel 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 Gyeongnam Steel and Naver into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Gyeongnam Steel Co and Naver, you can compare the effects of market volatilities on Gyeongnam Steel 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 Gyeongnam Steel with a short position of Naver. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gyeongnam Steel and Naver.
Diversification Opportunities for Gyeongnam Steel and Naver
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Gyeongnam and Naver is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Gyeongnam Steel Co and Naver in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Naver and Gyeongnam Steel 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 Gyeongnam Steel 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 Gyeongnam Steel i.e., Gyeongnam Steel and Naver go up and down completely randomly.
Pair Corralation between Gyeongnam Steel and Naver
Assuming the 90 days trading horizon Gyeongnam Steel Co is expected to generate 2.94 times more return on investment than Naver. However, Gyeongnam Steel is 2.94 times more volatile than Naver. It trades about 0.19 of its potential returns per unit of risk. Naver is currently generating about 0.15 per unit of risk. If you would invest 289,500 in Gyeongnam Steel Co on September 26, 2024 and sell it today you would earn a total of 224,500 from holding Gyeongnam Steel Co or generate 77.55% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Gyeongnam Steel Co vs. Naver
Performance |
Timeline |
Gyeongnam Steel |
Naver |
Gyeongnam Steel and Naver Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Gyeongnam Steel and Naver
The main advantage of trading using opposite Gyeongnam Steel and Naver positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gyeongnam Steel 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.Gyeongnam Steel vs. Shinsegae Food | Gyeongnam Steel vs. Semyung Electric Machinery | Gyeongnam Steel vs. Sungdo Engineering Construction | Gyeongnam Steel vs. Hyundai Green Food |
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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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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