Correlation Between Lotte Chilsung and Daejung Chemicals
Can any of the company-specific risk be diversified away by investing in both Lotte Chilsung and Daejung Chemicals 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 Daejung Chemicals 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 Daejung Chemicals Metals, you can compare the effects of market volatilities on Lotte Chilsung and Daejung Chemicals 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 Daejung Chemicals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lotte Chilsung and Daejung Chemicals.
Diversification Opportunities for Lotte Chilsung and Daejung Chemicals
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Lotte and Daejung is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Lotte Chilsung Beverage and Daejung Chemicals Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daejung Chemicals Metals 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 Daejung Chemicals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daejung Chemicals Metals has no effect on the direction of Lotte Chilsung i.e., Lotte Chilsung and Daejung Chemicals go up and down completely randomly.
Pair Corralation between Lotte Chilsung and Daejung Chemicals
Assuming the 90 days trading horizon Lotte Chilsung Beverage is expected to under-perform the Daejung Chemicals. But the stock apears to be less risky and, when comparing its historical volatility, Lotte Chilsung Beverage is 1.25 times less risky than Daejung Chemicals. The stock trades about -0.03 of its potential returns per unit of risk. The Daejung Chemicals Metals is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest 1,600,009 in Daejung Chemicals Metals on August 29, 2024 and sell it today you would lose (320,009) from holding Daejung Chemicals Metals or give up 20.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lotte Chilsung Beverage vs. Daejung Chemicals Metals
Performance |
| Timeline |
| Lotte Chilsung Beverage |
| Daejung Chemicals Metals |
Lotte Chilsung and Daejung Chemicals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lotte Chilsung and Daejung Chemicals
The main advantage of trading using opposite Lotte Chilsung and Daejung Chemicals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lotte Chilsung position performs unexpectedly, Daejung Chemicals 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 Daejung Chemicals will offset losses from the drop in Daejung Chemicals' 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 |
| Daejung Chemicals vs. Dong A Steel Technology | Daejung Chemicals vs. Ni Steel | Daejung Chemicals vs. Jeju Semiconductor Corp | Daejung Chemicals vs. Hankook Steel 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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