Correlation Between Display Tech and Naver

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

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

Diversification Opportunities for Display Tech and Naver

-0.88

Correlation Coefficient

Display Tech  Naver

Pay attention - limited upside

The 3 months correlation between Display and Naver is -0.88. Overlapping area represents the amount of risk that can be diversified away by holding Display Tech Co and Naver in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Naver and Display Tech 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 Display Tech 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 Display Tech i.e., Display Tech and Naver go up and down completely randomly.

Pair Corralation between Display Tech and Naver

Assuming the 90 days trading horizon Display Tech Co is expected to under-perform the Naver. In addition to that, Display Tech is 1.14 times more volatile than Naver. It trades about -0.11 of its total potential returns per unit of risk. Naver is currently generating about 0.24 per unit of volatility. If you would invest  16,060,000  in Naver on September 15, 2024 and sell it today you would earn a total of  4,940,000  from holding Naver or generate 30.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Display Tech Co  vs.  Naver

Display Tech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Display Tech Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Naver

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Naver are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Naver sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Display Tech and Naver

The main advantage of trading using opposite Display Tech and Naver positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Display Tech 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.

The idea behind Display Tech Co and Naver 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.