Correlation Between Songwon Industrial and Lotte Fine
Can any of the company-specific risk be diversified away by investing in both Songwon Industrial and Lotte Fine 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 Songwon Industrial and Lotte Fine into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Songwon Industrial Co and Lotte Fine Chemical, you can compare the effects of market volatilities on Songwon Industrial and Lotte Fine 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 Songwon Industrial with a short position of Lotte Fine. Check out your portfolio center. Please also check ongoing floating volatility patterns of Songwon Industrial and Lotte Fine.
Diversification Opportunities for Songwon Industrial and Lotte Fine
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Songwon and Lotte is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Songwon Industrial Co and Lotte Fine Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lotte Fine Chemical and Songwon Industrial 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 Songwon Industrial Co are associated (or correlated) with Lotte Fine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lotte Fine Chemical has no effect on the direction of Songwon Industrial i.e., Songwon Industrial and Lotte Fine go up and down completely randomly.
Pair Corralation between Songwon Industrial and Lotte Fine
Assuming the 90 days trading horizon Songwon Industrial Co is expected to generate 1.69 times more return on investment than Lotte Fine. However, Songwon Industrial is 1.69 times more volatile than Lotte Fine Chemical. It trades about 0.28 of its potential returns per unit of risk. Lotte Fine Chemical is currently generating about -0.09 per unit of risk. If you would invest 1,100,000 in Songwon Industrial Co on November 4, 2024 and sell it today you would earn a total of 140,000 from holding Songwon Industrial Co or generate 12.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Songwon Industrial Co vs. Lotte Fine Chemical
Performance |
| Timeline |
| Songwon Industrial |
| Lotte Fine Chemical |
Songwon Industrial and Lotte Fine Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Songwon Industrial and Lotte Fine
The main advantage of trading using opposite Songwon Industrial and Lotte Fine positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Songwon Industrial position performs unexpectedly, Lotte Fine 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 Lotte Fine will offset losses from the drop in Lotte Fine's long position.| Songwon Industrial vs. LEENO Industrial | Songwon Industrial vs. Seoyon Topmetal Co | Songwon Industrial vs. Seoul Food Industrial | Songwon Industrial vs. Hanjoo Light Metal |
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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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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