Correlation Between Lotte Non and Daedong Gear
Can any of the company-specific risk be diversified away by investing in both Lotte Non and Daedong Gear 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 Lotte Non and Daedong Gear into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lotte Non Life and Daedong Gear Co, you can compare the effects of market volatilities on Lotte Non and Daedong Gear 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 Lotte Non with a short position of Daedong Gear. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lotte Non and Daedong Gear.
Diversification Opportunities for Lotte Non and Daedong Gear
-0.53 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Lotte and Daedong is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Lotte Non Life and Daedong Gear Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daedong Gear and Lotte Non 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 Lotte Non Life are associated (or correlated) with Daedong Gear. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daedong Gear has no effect on the direction of Lotte Non i.e., Lotte Non and Daedong Gear go up and down completely randomly.
Pair Corralation between Lotte Non and Daedong Gear
Assuming the 90 days trading horizon Lotte Non is expected to generate 2.5 times less return on investment than Daedong Gear. But when comparing it to its historical volatility, Lotte Non Life is 1.35 times less risky than Daedong Gear. It trades about 0.03 of its potential returns per unit of risk. Daedong Gear Co is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 677,748 in Daedong Gear Co on August 31, 2024 and sell it today you would earn a total of 492,252 from holding Daedong Gear Co or generate 72.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 99.72% |
| Values | Daily Returns |
Lotte Non Life vs. Daedong Gear Co
Performance |
| Timeline |
| Lotte Non Life |
| Daedong Gear |
Lotte Non and Daedong Gear Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lotte Non and Daedong Gear
The main advantage of trading using opposite Lotte Non and Daedong Gear positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lotte Non position performs unexpectedly, Daedong Gear 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 Daedong Gear will offset losses from the drop in Daedong Gear's long position.| Lotte Non vs. Hanwha InvestmentSecurities Co | Lotte Non vs. CU Tech Corp | Lotte Non vs. Woori Technology | Lotte Non vs. Hwangkum Steel Technology |
| Daedong Gear vs. Dongkuk Structures Construction | Daedong Gear vs. Polaris Office Corp | Daedong Gear vs. Taegu Broadcasting | Daedong Gear vs. Asiana Airlines |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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