Correlation Between Lotte Fine and Digital Imaging
Can any of the company-specific risk be diversified away by investing in both Lotte Fine and Digital Imaging 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 Digital Imaging 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 Digital Imaging Technology, you can compare the effects of market volatilities on Lotte Fine and Digital Imaging 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 Digital Imaging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lotte Fine and Digital Imaging.
Diversification Opportunities for Lotte Fine and Digital Imaging
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Lotte and Digital is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Lotte Fine Chemical and Digital Imaging Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Digital Imaging Tech 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 Digital Imaging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Digital Imaging Tech has no effect on the direction of Lotte Fine i.e., Lotte Fine and Digital Imaging go up and down completely randomly.
Pair Corralation between Lotte Fine and Digital Imaging
Assuming the 90 days trading horizon Lotte Fine is expected to generate 2.52 times less return on investment than Digital Imaging. But when comparing it to its historical volatility, Lotte Fine Chemical is 1.61 times less risky than Digital Imaging. It trades about 0.24 of its potential returns per unit of risk. Digital Imaging Technology is currently generating about 0.37 of returns per unit of risk over similar time horizon. If you would invest 1,079,000 in Digital Imaging Technology on October 11, 2024 and sell it today you would earn a total of 263,000 from holding Digital Imaging Technology or generate 24.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.0% |
| Values | Daily Returns |
Lotte Fine Chemical vs. Digital Imaging Technology
Performance |
| Timeline |
| Lotte Fine Chemical |
| Digital Imaging Tech |
Lotte Fine and Digital Imaging Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lotte Fine and Digital Imaging
The main advantage of trading using opposite Lotte Fine and Digital Imaging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lotte Fine position performs unexpectedly, Digital Imaging 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 Digital Imaging will offset losses from the drop in Digital Imaging's long position.| Lotte Fine vs. KyungIn Electronics Co | Lotte Fine vs. Daeduck Electronics Co | Lotte Fine vs. Anam Electronics Co | Lotte Fine vs. Daewon Chemical Co |
| Digital Imaging vs. SK Telecom Co | Digital Imaging vs. Daishin Information Communications | Digital Imaging vs. SK Chemicals Co | Digital Imaging vs. Display 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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