Correlation Between Lotte Non and GS Engineering
Can any of the company-specific risk be diversified away by investing in both Lotte Non and GS Engineering 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 GS Engineering into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lotte Non Life Insurance and GS Engineering Construction, you can compare the effects of market volatilities on Lotte Non and GS Engineering 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 GS Engineering. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lotte Non and GS Engineering.
Diversification Opportunities for Lotte Non and GS Engineering
0.08 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Lotte and 006360 is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Lotte Non Life Insurance and GS Engineering Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GS Engineering Const 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 Insurance are associated (or correlated) with GS Engineering. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GS Engineering Const has no effect on the direction of Lotte Non i.e., Lotte Non and GS Engineering go up and down completely randomly.
Pair Corralation between Lotte Non and GS Engineering
Assuming the 90 days trading horizon Lotte Non Life Insurance is expected to under-perform the GS Engineering. But the stock apears to be less risky and, when comparing its historical volatility, Lotte Non Life Insurance is 1.52 times less risky than GS Engineering. The stock trades about -0.15 of its potential returns per unit of risk. The GS Engineering Construction is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest 1,810,000 in GS Engineering Construction on October 25, 2024 and sell it today you would lose (63,000) from holding GS Engineering Construction or give up 3.48% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lotte Non Life Insurance vs. GS Engineering Construction
Performance |
| Timeline |
| Lotte Non Life |
| GS Engineering Const |
Lotte Non and GS Engineering Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lotte Non and GS Engineering
The main advantage of trading using opposite Lotte Non and GS Engineering positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lotte Non position performs unexpectedly, GS Engineering 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 GS Engineering will offset losses from the drop in GS Engineering's long position.| Lotte Non vs. KB Financial Group | Lotte Non vs. Shinhan Financial Group | Lotte Non vs. Hana Financial | Lotte Non vs. Woori Financial Group |
| GS Engineering vs. KB Financial Group | GS Engineering vs. Shinhan Financial Group | GS Engineering vs. Hana Financial | GS Engineering vs. Woori Financial Group |
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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