Correlation Between Lotte Fine and Hannong Chemicals
Can any of the company-specific risk be diversified away by investing in both Lotte Fine and Hannong 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 Fine and Hannong Chemicals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lotte Fine Chemical and Hannong Chemicals, you can compare the effects of market volatilities on Lotte Fine and Hannong 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 Fine with a short position of Hannong Chemicals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lotte Fine and Hannong Chemicals.
Diversification Opportunities for Lotte Fine and Hannong Chemicals
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Lotte and Hannong is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Lotte Fine Chemical and Hannong Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hannong Chemicals and Lotte Fine 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 Fine Chemical are associated (or correlated) with Hannong Chemicals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hannong Chemicals has no effect on the direction of Lotte Fine i.e., Lotte Fine and Hannong Chemicals go up and down completely randomly.
Pair Corralation between Lotte Fine and Hannong Chemicals
Assuming the 90 days trading horizon Lotte Fine is expected to generate 3.03 times less return on investment than Hannong Chemicals. But when comparing it to its historical volatility, Lotte Fine Chemical is 1.77 times less risky than Hannong Chemicals. It trades about 0.05 of its potential returns per unit of risk. Hannong Chemicals is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 1,313,000 in Hannong Chemicals on November 3, 2024 and sell it today you would earn a total of 56,000 from holding Hannong Chemicals or generate 4.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lotte Fine Chemical vs. Hannong Chemicals
Performance |
| Timeline |
| Lotte Fine Chemical |
| Hannong Chemicals |
Lotte Fine and Hannong Chemicals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lotte Fine and Hannong Chemicals
The main advantage of trading using opposite Lotte Fine and Hannong Chemicals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lotte Fine position performs unexpectedly, Hannong 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 Hannong Chemicals will offset losses from the drop in Hannong Chemicals' long position.| Lotte Fine vs. Insun Environment New | Lotte Fine vs. BooKook Steel Co | Lotte Fine vs. Hankukpackage Co | Lotte Fine vs. Lotte Non Life Insurance |
| Hannong Chemicals vs. Tae Kyung Chemical | Hannong Chemicals vs. Lotte Data Communication | Hannong Chemicals vs. Miwon Chemical | Hannong Chemicals vs. Namhae Chemical |
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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