Correlation Between Lotte Non-Life and I-Scream Edu

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Can any of the company-specific risk be diversified away by investing in both Lotte Non-Life and I-Scream Edu 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-Life and I-Scream Edu 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 I Scream Edu CoLtd, you can compare the effects of market volatilities on Lotte Non-Life and I-Scream Edu 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-Life with a short position of I-Scream Edu. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lotte Non-Life and I-Scream Edu.

Diversification Opportunities for Lotte Non-Life and I-Scream Edu

0.36
  Correlation Coefficient

Weak diversification

The 3 months correlation between Lotte and I-Scream is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Lotte Non Life Insurance and I Scream Edu CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on I Scream Edu and Lotte Non-Life 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 I-Scream Edu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of I Scream Edu has no effect on the direction of Lotte Non-Life i.e., Lotte Non-Life and I-Scream Edu go up and down completely randomly.

Pair Corralation between Lotte Non-Life and I-Scream Edu

Assuming the 90 days trading horizon Lotte Non-Life is expected to generate 3.02 times less return on investment than I-Scream Edu. But when comparing it to its historical volatility, Lotte Non Life Insurance is 1.13 times less risky than I-Scream Edu. It trades about 0.05 of its potential returns per unit of risk. I Scream Edu CoLtd is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  238,500  in I Scream Edu CoLtd on September 14, 2024 and sell it today you would earn a total of  24,500  from holding I Scream Edu CoLtd or generate 10.27% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy95.65%
ValuesDaily Returns

Lotte Non Life Insurance  vs.  I Scream Edu CoLtd

 Performance 
       Timeline  
Lotte Non Life 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Lotte Non Life Insurance 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 January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.
I Scream Edu 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in I Scream Edu CoLtd are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, I-Scream Edu may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Lotte Non-Life and I-Scream Edu Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Lotte Non-Life and I-Scream Edu

The main advantage of trading using opposite Lotte Non-Life and I-Scream Edu positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lotte Non-Life position performs unexpectedly, I-Scream Edu 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 I-Scream Edu will offset losses from the drop in I-Scream Edu's long position.
The idea behind Lotte Non Life Insurance and I Scream Edu CoLtd 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.

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