Correlation Between Lotte Chilsung and Bohae Brewery
Can any of the company-specific risk be diversified away by investing in both Lotte Chilsung and Bohae Brewery 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 Chilsung and Bohae Brewery into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lotte Chilsung Beverage and Bohae Brewery, you can compare the effects of market volatilities on Lotte Chilsung and Bohae Brewery 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 Chilsung with a short position of Bohae Brewery. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lotte Chilsung and Bohae Brewery.
Diversification Opportunities for Lotte Chilsung and Bohae Brewery
0.27 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Lotte and Bohae is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Lotte Chilsung Beverage and Bohae Brewery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bohae Brewery and Lotte Chilsung 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 Chilsung Beverage are associated (or correlated) with Bohae Brewery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bohae Brewery has no effect on the direction of Lotte Chilsung i.e., Lotte Chilsung and Bohae Brewery go up and down completely randomly.
Pair Corralation between Lotte Chilsung and Bohae Brewery
Assuming the 90 days trading horizon Lotte Chilsung is expected to generate 25.42 times less return on investment than Bohae Brewery. But when comparing it to its historical volatility, Lotte Chilsung Beverage is 4.3 times less risky than Bohae Brewery. It trades about 0.02 of its potential returns per unit of risk. Bohae Brewery is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 41,700 in Bohae Brewery on September 2, 2024 and sell it today you would earn a total of 4,900 from holding Bohae Brewery or generate 11.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lotte Chilsung Beverage vs. Bohae Brewery
Performance |
| Timeline |
| Lotte Chilsung Beverage |
| Bohae Brewery |
Lotte Chilsung and Bohae Brewery Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lotte Chilsung and Bohae Brewery
The main advantage of trading using opposite Lotte Chilsung and Bohae Brewery positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lotte Chilsung position performs unexpectedly, Bohae Brewery 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 Bohae Brewery will offset losses from the drop in Bohae Brewery's long position.| Lotte Chilsung vs. Korea Real Estate | Lotte Chilsung vs. Korea Ratings Co | Lotte Chilsung vs. IQuest Co | Lotte Chilsung vs. Wonbang Tech Co |
| Bohae Brewery vs. Korea Real Estate | Bohae Brewery vs. Korea Ratings Co | Bohae Brewery vs. IQuest Co | Bohae Brewery 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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