Correlation Between Lotte Non and Daechang Steel
Can any of the company-specific risk be diversified away by investing in both Lotte Non and Daechang Steel 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 Daechang Steel 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 Daechang Steel Co, you can compare the effects of market volatilities on Lotte Non and Daechang Steel 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 Daechang Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lotte Non and Daechang Steel.
Diversification Opportunities for Lotte Non and Daechang Steel
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Lotte and Daechang is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Lotte Non Life Insurance and Daechang Steel Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daechang Steel 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 Daechang Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daechang Steel has no effect on the direction of Lotte Non i.e., Lotte Non and Daechang Steel go up and down completely randomly.
Pair Corralation between Lotte Non and Daechang Steel
Assuming the 90 days trading horizon Lotte Non Life Insurance is expected to under-perform the Daechang Steel. In addition to that, Lotte Non is 1.17 times more volatile than Daechang Steel Co. It trades about -0.29 of its total potential returns per unit of risk. Daechang Steel Co is currently generating about -0.01 per unit of volatility. If you would invest 203,500 in Daechang Steel Co on November 6, 2024 and sell it today you would lose (500.00) from holding Daechang Steel Co or give up 0.25% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lotte Non Life Insurance vs. Daechang Steel Co
Performance |
| Timeline |
| Lotte Non Life |
| Daechang Steel |
Lotte Non and Daechang Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lotte Non and Daechang Steel
The main advantage of trading using opposite Lotte Non and Daechang Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lotte Non position performs unexpectedly, Daechang Steel 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 Daechang Steel will offset losses from the drop in Daechang Steel's long position.| Lotte Non vs. LG Chemicals | Lotte Non vs. Daehan Steel | Lotte Non vs. Finebesteel | Lotte Non vs. Daesung Industrial Co |
| Daechang Steel vs. Korea Petro Chemical | Daechang Steel vs. GS Engineering Construction | Daechang Steel vs. Woorim Machinery Co | Daechang Steel vs. SEOJEON ELECTRIC MACHINERY |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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