Correlation Between Lotte Non-Life and Settlebank
Can any of the company-specific risk be diversified away by investing in both Lotte Non-Life and Settlebank 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 Settlebank 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 Settlebank, you can compare the effects of market volatilities on Lotte Non-Life and Settlebank 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 Settlebank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lotte Non-Life and Settlebank.
Diversification Opportunities for Lotte Non-Life and Settlebank
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Lotte and Settlebank is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Lotte Non Life and Settlebank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Settlebank 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 Settlebank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Settlebank has no effect on the direction of Lotte Non-Life i.e., Lotte Non-Life and Settlebank go up and down completely randomly.
Pair Corralation between Lotte Non-Life and Settlebank
Assuming the 90 days trading horizon Lotte Non Life is expected to generate 1.19 times more return on investment than Settlebank. However, Lotte Non-Life is 1.19 times more volatile than Settlebank. It trades about 0.03 of its potential returns per unit of risk. Settlebank is currently generating about -0.02 per unit of risk. If you would invest 148,000 in Lotte Non Life on September 12, 2024 and sell it today you would earn a total of 46,700 from holding Lotte Non Life or generate 31.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lotte Non Life vs. Settlebank
Performance |
| Timeline |
| Lotte Non Life |
| Settlebank |
Lotte Non-Life and Settlebank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lotte Non-Life and Settlebank
The main advantage of trading using opposite Lotte Non-Life and Settlebank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lotte Non-Life position performs unexpectedly, Settlebank 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 Settlebank will offset losses from the drop in Settlebank's long position.| Lotte Non-Life vs. Dongnam Chemical Co | Lotte Non-Life vs. Youl Chon Chemical | Lotte Non-Life vs. Kukdong Oil Chemicals | Lotte Non-Life vs. Sempio Foods Co |
| Settlebank vs. Daishin Information Communications | Settlebank vs. Solution Advanced Technology | Settlebank vs. Busan Industrial Co | Settlebank vs. Busan Ind |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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