Correlation Between Lotte Fine and Stic Investments
Can any of the company-specific risk be diversified away by investing in both Lotte Fine and Stic Investments 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 Stic Investments 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 Stic Investments, you can compare the effects of market volatilities on Lotte Fine and Stic Investments 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 Stic Investments. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lotte Fine and Stic Investments.
Diversification Opportunities for Lotte Fine and Stic Investments
0.52 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Lotte and Stic is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Lotte Fine Chemical and Stic Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stic Investments 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 Stic Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stic Investments has no effect on the direction of Lotte Fine i.e., Lotte Fine and Stic Investments go up and down completely randomly.
Pair Corralation between Lotte Fine and Stic Investments
Assuming the 90 days trading horizon Lotte Fine Chemical is expected to under-perform the Stic Investments. In addition to that, Lotte Fine is 1.19 times more volatile than Stic Investments. It trades about -0.4 of its total potential returns per unit of risk. Stic Investments is currently generating about -0.05 per unit of volatility. If you would invest 799,000 in Stic Investments on August 25, 2024 and sell it today you would lose (19,000) from holding Stic Investments or give up 2.38% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lotte Fine Chemical vs. Stic Investments
Performance |
| Timeline |
| Lotte Fine Chemical |
| Stic Investments |
Lotte Fine and Stic Investments Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lotte Fine and Stic Investments
The main advantage of trading using opposite Lotte Fine and Stic Investments positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lotte Fine position performs unexpectedly, Stic Investments 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 Stic Investments will offset losses from the drop in Stic Investments' long position.| Lotte Fine vs. LG Chemicals | Lotte Fine vs. POSCO Holdings | Lotte Fine vs. Lotte Chemical Corp | Lotte Fine vs. Hyundai Steel |
| Stic Investments vs. Korea Real Estate | Stic Investments vs. Korea Ratings Co | Stic Investments vs. IQuest Co | Stic Investments vs. Wonbang Tech Co |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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