Correlation Between Lotte Chilsung and Korean Drug
Can any of the company-specific risk be diversified away by investing in both Lotte Chilsung and Korean Drug 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 Korean Drug 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 Korean Drug Co, you can compare the effects of market volatilities on Lotte Chilsung and Korean Drug 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 Korean Drug. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lotte Chilsung and Korean Drug.
Diversification Opportunities for Lotte Chilsung and Korean Drug
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Lotte and Korean is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Lotte Chilsung Beverage and Korean Drug Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Korean Drug 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 Korean Drug. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Korean Drug has no effect on the direction of Lotte Chilsung i.e., Lotte Chilsung and Korean Drug go up and down completely randomly.
Pair Corralation between Lotte Chilsung and Korean Drug
Assuming the 90 days trading horizon Lotte Chilsung Beverage is expected to generate 1.53 times more return on investment than Korean Drug. However, Lotte Chilsung is 1.53 times more volatile than Korean Drug Co. It trades about 0.08 of its potential returns per unit of risk. Korean Drug Co is currently generating about -0.2 per unit of risk. If you would invest 11,830,000 in Lotte Chilsung Beverage on August 29, 2024 and sell it today you would earn a total of 380,000 from holding Lotte Chilsung Beverage or generate 3.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lotte Chilsung Beverage vs. Korean Drug Co
Performance |
| Timeline |
| Lotte Chilsung Beverage |
| Korean Drug |
Lotte Chilsung and Korean Drug Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lotte Chilsung and Korean Drug
The main advantage of trading using opposite Lotte Chilsung and Korean Drug positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lotte Chilsung position performs unexpectedly, Korean Drug 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 Korean Drug will offset losses from the drop in Korean Drug's long position.| Lotte Chilsung vs. Samsung Electronics Co | Lotte Chilsung vs. Samsung Electronics Co | Lotte Chilsung vs. Hyundai Motor Co | Lotte Chilsung vs. Hyundai Motor |
| Korean Drug vs. AnterogenCoLtd | Korean Drug vs. Busan Industrial Co | Korean Drug vs. Busan Ind | Korean Drug vs. Shinhan WTI Futures |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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