Correlation Between Lotte Fine and Dreamus
Can any of the company-specific risk be diversified away by investing in both Lotte Fine and Dreamus 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 Dreamus 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 Dreamus Company, you can compare the effects of market volatilities on Lotte Fine and Dreamus 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 Dreamus. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lotte Fine and Dreamus.
Diversification Opportunities for Lotte Fine and Dreamus
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Lotte and Dreamus is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Lotte Fine Chemical and Dreamus Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dreamus Company 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 Dreamus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dreamus Company has no effect on the direction of Lotte Fine i.e., Lotte Fine and Dreamus go up and down completely randomly.
Pair Corralation between Lotte Fine and Dreamus
Assuming the 90 days trading horizon Lotte Fine is expected to generate 2.17 times less return on investment than Dreamus. But when comparing it to its historical volatility, Lotte Fine Chemical is 1.25 times less risky than Dreamus. It trades about 0.1 of its potential returns per unit of risk. Dreamus Company is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 152,000 in Dreamus Company on September 15, 2024 and sell it today you would earn a total of 21,900 from holding Dreamus Company or generate 14.41% 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. Dreamus Company
Performance |
| Timeline |
| Lotte Fine Chemical |
| Dreamus Company |
Lotte Fine and Dreamus Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lotte Fine and Dreamus
The main advantage of trading using opposite Lotte Fine and Dreamus positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lotte Fine position performs unexpectedly, Dreamus 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 Dreamus will offset losses from the drop in Dreamus' long position.| Lotte Fine vs. Infinitt Healthcare Co | Lotte Fine vs. Cheryong Industrial CoLtd | Lotte Fine vs. Woorim Machinery Co | Lotte Fine vs. Songwon Industrial Co |
| Dreamus vs. PLAYWITH | Dreamus vs. Lotte Fine Chemical | Dreamus vs. Inzi Display CoLtd | Dreamus vs. Youngbo Chemical 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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