Correlation Between Lotte Non and GS Retail

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Can any of the company-specific risk be diversified away by investing in both Lotte Non and GS Retail 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 Retail 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 Retail Co, you can compare the effects of market volatilities on Lotte Non and GS Retail 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 Retail. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lotte Non and GS Retail.

Diversification Opportunities for Lotte Non and GS Retail

Lotte007070Diversified AwayLotte007070Diversified Away100%
0.52
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Lotte and 007070 is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Lotte Non Life Insurance and GS Retail Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GS Retail 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 Retail. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GS Retail has no effect on the direction of Lotte Non i.e., Lotte Non and GS Retail go up and down completely randomly.

Pair Corralation between Lotte Non and GS Retail

Assuming the 90 days trading horizon Lotte Non Life Insurance is expected to generate 1.98 times more return on investment than GS Retail. However, Lotte Non is 1.98 times more volatile than GS Retail Co. It trades about 0.03 of its potential returns per unit of risk. GS Retail Co is currently generating about -0.05 per unit of risk. If you would invest  158,000  in Lotte Non Life Insurance on November 20, 2024 and sell it today you would earn a total of  23,400  from holding Lotte Non Life Insurance or generate 14.81% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy96.44%
ValuesDaily Returns

Lotte Non Life Insurance  vs.  GS Retail Co

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb -25-20-15-10-505
JavaScript chart by amCharts 3.21.15000400 007070
       Timeline  
Lotte Non Life 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Lotte Non Life Insurance has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb1,7501,8001,8501,9001,9502,0002,0502,1002,150
GS Retail 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days GS Retail 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 March 2025. The current disturbance may also be a sign of long term up-swing for the company investors.
JavaScript chart by amCharts 3.21.15NovDecJanFebDecJanFeb15,00016,00017,00018,00019,00020,00021,000

Lotte Non and GS Retail Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-4.19-3.14-2.08-1.03-0.01530.91.812.733.64 0.0500.0550.0600.0650.070
JavaScript chart by amCharts 3.21.15000400 007070
       Returns  

Pair Trading with Lotte Non and GS Retail

The main advantage of trading using opposite Lotte Non and GS Retail positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lotte Non position performs unexpectedly, GS Retail 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 Retail will offset losses from the drop in GS Retail's long position.
The idea behind Lotte Non Life Insurance and GS Retail Co 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.
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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 Transaction History module to view history of all your transactions and understand their impact on performance.

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