Correlation Between Lotte Non-Life and Daejoo Electronic
Can any of the company-specific risk be diversified away by investing in both Lotte Non-Life and Daejoo Electronic 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-Life and Daejoo Electronic 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 Daejoo Electronic Materials, you can compare the effects of market volatilities on Lotte Non-Life and Daejoo Electronic 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-Life with a short position of Daejoo Electronic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lotte Non-Life and Daejoo Electronic.
Diversification Opportunities for Lotte Non-Life and Daejoo Electronic
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Lotte and Daejoo is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Lotte Non Life and Daejoo Electronic Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daejoo Electronic and Lotte Non-Life 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 Daejoo Electronic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daejoo Electronic has no effect on the direction of Lotte Non-Life i.e., Lotte Non-Life and Daejoo Electronic go up and down completely randomly.
Pair Corralation between Lotte Non-Life and Daejoo Electronic
Assuming the 90 days trading horizon Lotte Non Life is expected to generate 0.85 times more return on investment than Daejoo Electronic. However, Lotte Non Life is 1.18 times less risky than Daejoo Electronic. It trades about -0.04 of its potential returns per unit of risk. Daejoo Electronic Materials is currently generating about -0.07 per unit of risk. If you would invest 207,500 in Lotte Non Life on September 13, 2024 and sell it today you would lose (7,500) from holding Lotte Non Life or give up 3.61% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lotte Non Life vs. Daejoo Electronic Materials
Performance |
| Timeline |
| Lotte Non Life |
| Daejoo Electronic |
Lotte Non-Life and Daejoo Electronic Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lotte Non-Life and Daejoo Electronic
The main advantage of trading using opposite Lotte Non-Life and Daejoo Electronic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lotte Non-Life position performs unexpectedly, Daejoo Electronic 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 Daejoo Electronic will offset losses from the drop in Daejoo Electronic's long position.| Lotte Non-Life vs. KB Financial Group | Lotte Non-Life vs. Shinhan Financial Group | Lotte Non-Life vs. Hana Financial | Lotte Non-Life vs. Woori Financial Group |
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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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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