Correlation Between Lotte Non and Innodep
Can any of the company-specific risk be diversified away by investing in both Lotte Non and Innodep 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 Innodep 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 Innodep, you can compare the effects of market volatilities on Lotte Non and Innodep 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 Innodep. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lotte Non and Innodep.
Diversification Opportunities for Lotte Non and Innodep
Very poor diversification
The 3 months correlation between Lotte and Innodep is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Lotte Non Life Insurance and Innodep in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innodep 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 Innodep. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Innodep has no effect on the direction of Lotte Non i.e., Lotte Non and Innodep go up and down completely randomly.
Pair Corralation between Lotte Non and Innodep
Assuming the 90 days trading horizon Lotte Non Life Insurance is expected to generate 1.13 times more return on investment than Innodep. However, Lotte Non is 1.13 times more volatile than Innodep. It trades about 0.01 of its potential returns per unit of risk. Innodep is currently generating about -0.03 per unit of risk. If you would invest 232,000 in Lotte Non Life Insurance on September 5, 2024 and sell it today you would lose (23,500) from holding Lotte Non Life Insurance or give up 10.13% 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. Innodep
Performance |
| Timeline |
| Lotte Non Life |
| Innodep |
Lotte Non and Innodep Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lotte Non and Innodep
The main advantage of trading using opposite Lotte Non and Innodep positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lotte Non position performs unexpectedly, Innodep 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 Innodep will offset losses from the drop in Innodep's long position.| Lotte Non vs. Seoam Machinery Industry | Lotte Non vs. Dongwoo Farm To | Lotte Non vs. ENERGYMACHINERY KOREA CoLtd | Lotte Non vs. Samick Musical Instruments |
| Innodep vs. Woori Technology Investment | Innodep vs. EBEST Investment Securities | Innodep vs. Iljin Display | Innodep vs. NH Investment Securities |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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