Correlation Between Lotte Fine and LG Electronics
Can any of the company-specific risk be diversified away by investing in both Lotte Fine and LG Electronics 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 LG Electronics 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 LG Electronics, you can compare the effects of market volatilities on Lotte Fine and LG Electronics 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 LG Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lotte Fine and LG Electronics.
Diversification Opportunities for Lotte Fine and LG Electronics
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Lotte and 066570 is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Lotte Fine Chemical and LG Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LG Electronics 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 LG Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LG Electronics has no effect on the direction of Lotte Fine i.e., Lotte Fine and LG Electronics go up and down completely randomly.
Pair Corralation between Lotte Fine and LG Electronics
Assuming the 90 days trading horizon Lotte Fine Chemical is expected to generate 1.47 times more return on investment than LG Electronics. However, Lotte Fine is 1.47 times more volatile than LG Electronics. It trades about 0.17 of its potential returns per unit of risk. LG Electronics is currently generating about -0.2 per unit of risk. If you would invest 3,575,000 in Lotte Fine Chemical on September 24, 2024 and sell it today you would earn a total of 380,000 from holding Lotte Fine Chemical or generate 10.63% 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. LG Electronics
Performance |
| Timeline |
| Lotte Fine Chemical |
| LG Electronics |
Lotte Fine and LG Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lotte Fine and LG Electronics
The main advantage of trading using opposite Lotte Fine and LG Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lotte Fine position performs unexpectedly, LG Electronics 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 LG Electronics will offset losses from the drop in LG Electronics' long position.| Lotte Fine vs. LG Chemicals | Lotte Fine vs. POSCO Holdings | Lotte Fine vs. Hanwha Solutions | Lotte Fine vs. Lotte Chemical Corp |
| LG Electronics vs. MetaLabs Co | LG Electronics vs. Lotte Fine Chemical | LG Electronics vs. Heungkuk Metaltech CoLtd | LG Electronics vs. SH Energy 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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