Correlation Between Lotte Chilsung and Lotte Energy
Can any of the company-specific risk be diversified away by investing in both Lotte Chilsung and Lotte Energy 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 Lotte Energy 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 Lotte Energy Materials, you can compare the effects of market volatilities on Lotte Chilsung and Lotte Energy 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 Lotte Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lotte Chilsung and Lotte Energy.
Diversification Opportunities for Lotte Chilsung and Lotte Energy
0.1 | Correlation Coefficient |
Average diversification
The 3 months correlation between Lotte and Lotte is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Lotte Chilsung Beverage and Lotte Energy Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lotte Energy Materials 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 Lotte Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lotte Energy Materials has no effect on the direction of Lotte Chilsung i.e., Lotte Chilsung and Lotte Energy go up and down completely randomly.
Pair Corralation between Lotte Chilsung and Lotte Energy
Assuming the 90 days trading horizon Lotte Chilsung is expected to generate 8.95 times less return on investment than Lotte Energy. But when comparing it to its historical volatility, Lotte Chilsung Beverage is 3.26 times less risky than Lotte Energy. It trades about 0.11 of its potential returns per unit of risk. Lotte Energy Materials is currently generating about 0.32 of returns per unit of risk over similar time horizon. If you would invest 2,210,000 in Lotte Energy Materials on November 28, 2024 and sell it today you would earn a total of 585,000 from holding Lotte Energy Materials or generate 26.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lotte Chilsung Beverage vs. Lotte Energy Materials
Performance |
| Timeline |
| Lotte Chilsung Beverage |
| Lotte Energy Materials |
Lotte Chilsung and Lotte Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lotte Chilsung and Lotte Energy
The main advantage of trading using opposite Lotte Chilsung and Lotte Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lotte Chilsung position performs unexpectedly, Lotte Energy 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 Energy will offset losses from the drop in Lotte Energy's long position.| Lotte Chilsung vs. Heungkuk Metaltech CoLtd | Lotte Chilsung vs. Fine Besteel Co | Lotte Chilsung vs. Duksan Hi Metal | Lotte Chilsung vs. Husteel |
| Lotte Energy vs. V One Tech Co | Lotte Energy vs. Playgram Co | Lotte Energy vs. KMH Hitech Co | Lotte Energy vs. Yura 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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