Correlation Between Lotte Non and Homecast CoLtd
Can any of the company-specific risk be diversified away by investing in both Lotte Non and Homecast CoLtd 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 Homecast CoLtd 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 Homecast CoLtd, you can compare the effects of market volatilities on Lotte Non and Homecast CoLtd 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 Homecast CoLtd. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lotte Non and Homecast CoLtd.
Diversification Opportunities for Lotte Non and Homecast CoLtd
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Lotte and Homecast is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Lotte Non Life Insurance and Homecast CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Homecast CoLtd 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 Homecast CoLtd. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Homecast CoLtd has no effect on the direction of Lotte Non i.e., Lotte Non and Homecast CoLtd go up and down completely randomly.
Pair Corralation between Lotte Non and Homecast CoLtd
Assuming the 90 days trading horizon Lotte Non Life Insurance is expected to generate 0.86 times more return on investment than Homecast CoLtd. However, Lotte Non Life Insurance is 1.17 times less risky than Homecast CoLtd. It trades about 0.03 of its potential returns per unit of risk. Homecast CoLtd is currently generating about -0.01 per unit of risk. If you would invest 154,800 in Lotte Non Life Insurance on October 16, 2024 and sell it today you would earn a total of 49,200 from holding Lotte Non Life Insurance or generate 31.78% 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. Homecast CoLtd
Performance |
| Timeline |
| Lotte Non Life |
| Homecast CoLtd |
Lotte Non and Homecast CoLtd Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lotte Non and Homecast CoLtd
The main advantage of trading using opposite Lotte Non and Homecast CoLtd positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lotte Non position performs unexpectedly, Homecast CoLtd 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 Homecast CoLtd will offset losses from the drop in Homecast CoLtd's long position.| Lotte Non vs. Hyundai Green Food | Lotte Non vs. Sajo Seafood | Lotte Non vs. Seoul Electronics Telecom | Lotte Non vs. Jeju Semiconductor Corp |
| Homecast CoLtd vs. Seoul Food Industrial | Homecast CoLtd vs. Sajo Seafood | Homecast CoLtd vs. Hanmi Semiconductor Co | Homecast CoLtd vs. Lotte Non Life Insurance |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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