Correlation Between Lotte Chilsung and ABCO Electronics
Can any of the company-specific risk be diversified away by investing in both Lotte Chilsung and ABCO Electronics 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 ABCO Electronics 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 ABCO Electronics Co, you can compare the effects of market volatilities on Lotte Chilsung and ABCO Electronics 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 ABCO Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lotte Chilsung and ABCO Electronics.
Diversification Opportunities for Lotte Chilsung and ABCO Electronics
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Lotte and ABCO is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Lotte Chilsung Beverage and ABCO Electronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ABCO Electronics 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 ABCO Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ABCO Electronics has no effect on the direction of Lotte Chilsung i.e., Lotte Chilsung and ABCO Electronics go up and down completely randomly.
Pair Corralation between Lotte Chilsung and ABCO Electronics
Assuming the 90 days trading horizon Lotte Chilsung Beverage is expected to generate 0.5 times more return on investment than ABCO Electronics. However, Lotte Chilsung Beverage is 2.01 times less risky than ABCO Electronics. It trades about -0.03 of its potential returns per unit of risk. ABCO Electronics Co is currently generating about -0.18 per unit of risk. If you would invest 12,910,000 in Lotte Chilsung Beverage on August 29, 2024 and sell it today you would lose (1,010,000) from holding Lotte Chilsung Beverage or give up 7.82% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lotte Chilsung Beverage vs. ABCO Electronics Co
Performance |
| Timeline |
| Lotte Chilsung Beverage |
| ABCO Electronics |
Lotte Chilsung and ABCO Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lotte Chilsung and ABCO Electronics
The main advantage of trading using opposite Lotte Chilsung and ABCO Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lotte Chilsung position performs unexpectedly, ABCO Electronics 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 ABCO Electronics will offset losses from the drop in ABCO Electronics' long position.| Lotte Chilsung vs. Stic Investments | Lotte Chilsung vs. Heungkuk Metaltech CoLtd | Lotte Chilsung vs. Pureun Mutual Savings | Lotte Chilsung vs. Dongbang Transport Logistics |
| ABCO Electronics vs. Korea Real Estate | ABCO Electronics vs. Korea Ratings Co | ABCO Electronics vs. IQuest Co | ABCO Electronics 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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