Correlation Between Lotte Non and Korean Drug
Can any of the company-specific risk be diversified away by investing in both Lotte Non and Korean Drug 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 Korean Drug 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 Korean Drug Co, you can compare the effects of market volatilities on Lotte Non and Korean Drug 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 Korean Drug. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lotte Non and Korean Drug.
Diversification Opportunities for Lotte Non and Korean Drug
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Lotte and Korean is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Lotte Non Life Insurance and Korean Drug Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Korean Drug 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 Korean Drug. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Korean Drug has no effect on the direction of Lotte Non i.e., Lotte Non and Korean Drug go up and down completely randomly.
Pair Corralation between Lotte Non and Korean Drug
Assuming the 90 days trading horizon Lotte Non is expected to generate 3.1 times less return on investment than Korean Drug. But when comparing it to its historical volatility, Lotte Non Life Insurance is 2.65 times less risky than Korean Drug. It trades about 0.18 of its potential returns per unit of risk. Korean Drug Co is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 425,957 in Korean Drug Co on October 12, 2024 and sell it today you would earn a total of 66,043 from holding Korean Drug Co or generate 15.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lotte Non Life Insurance vs. Korean Drug Co
Performance |
| Timeline |
| Lotte Non Life |
| Korean Drug |
Lotte Non and Korean Drug Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lotte Non and Korean Drug
The main advantage of trading using opposite Lotte Non and Korean Drug positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lotte Non position performs unexpectedly, Korean Drug 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 Korean Drug will offset losses from the drop in Korean Drug's long position.| Lotte Non vs. Lotte Chilsung Beverage | Lotte Non vs. Hankukpackage Co | Lotte Non vs. Daewon Media Co | Lotte Non vs. Hankook Furniture Co |
| Korean Drug vs. Yura Tech Co | Korean Drug vs. Lotte Non Life Insurance | Korean Drug vs. SS TECH | Korean Drug vs. Samsung Publishing Co |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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