Correlation Between Lotte Non and SK Chemicals
Can any of the company-specific risk be diversified away by investing in both Lotte Non and SK Chemicals 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 SK Chemicals 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 SK Chemicals Co, you can compare the effects of market volatilities on Lotte Non and SK Chemicals 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 SK Chemicals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lotte Non and SK Chemicals.
Diversification Opportunities for Lotte Non and SK Chemicals
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Lotte and 28513K is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Lotte Non Life Insurance and SK Chemicals Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SK Chemicals 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 SK Chemicals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SK Chemicals has no effect on the direction of Lotte Non i.e., Lotte Non and SK Chemicals go up and down completely randomly.
Pair Corralation between Lotte Non and SK Chemicals
Assuming the 90 days trading horizon Lotte Non Life Insurance is expected to generate 1.94 times more return on investment than SK Chemicals. However, Lotte Non is 1.94 times more volatile than SK Chemicals Co. It trades about -0.18 of its potential returns per unit of risk. SK Chemicals Co is currently generating about -0.47 per unit of risk. If you would invest 227,000 in Lotte Non Life Insurance on September 1, 2024 and sell it today you would lose (23,500) from holding Lotte Non Life Insurance or give up 10.35% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lotte Non Life Insurance vs. SK Chemicals Co
Performance |
| Timeline |
| Lotte Non Life |
| SK Chemicals |
Lotte Non and SK Chemicals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lotte Non and SK Chemicals
The main advantage of trading using opposite Lotte Non and SK Chemicals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lotte Non position performs unexpectedly, SK Chemicals 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 SK Chemicals will offset losses from the drop in SK Chemicals' long position.| Lotte Non vs. AptaBio Therapeutics | Lotte Non vs. Daewoo SBI SPAC | Lotte Non vs. Dream Security co | Lotte Non vs. Microfriend |
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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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