Correlation Between Korea Steel and Lotte Data
Can any of the company-specific risk be diversified away by investing in both Korea Steel and Lotte Data 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 Korea Steel and Lotte Data into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Korea Steel Co and Lotte Data Communication, you can compare the effects of market volatilities on Korea Steel and Lotte Data 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 Korea Steel with a short position of Lotte Data. Check out your portfolio center. Please also check ongoing floating volatility patterns of Korea Steel and Lotte Data.
Diversification Opportunities for Korea Steel and Lotte Data
0.41 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Korea and Lotte is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Korea Steel Co and Lotte Data Communication in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lotte Data Communication and Korea Steel 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 Korea Steel Co are associated (or correlated) with Lotte Data. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lotte Data Communication has no effect on the direction of Korea Steel i.e., Korea Steel and Lotte Data go up and down completely randomly.
Pair Corralation between Korea Steel and Lotte Data
Assuming the 90 days trading horizon Korea Steel Co is expected to under-perform the Lotte Data. But the stock apears to be less risky and, when comparing its historical volatility, Korea Steel Co is 1.27 times less risky than Lotte Data. The stock trades about -0.04 of its potential returns per unit of risk. The Lotte Data Communication is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest 1,975,000 in Lotte Data Communication on November 23, 2024 and sell it today you would earn a total of 100,000 from holding Lotte Data Communication or generate 5.06% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Korea Steel Co vs. Lotte Data Communication
Performance |
Timeline |
Korea Steel |
Lotte Data Communication |
Korea Steel and Lotte Data Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Korea Steel and Lotte Data
The main advantage of trading using opposite Korea Steel and Lotte Data positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Korea Steel position performs unexpectedly, Lotte Data 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 Data will offset losses from the drop in Lotte Data's long position.Korea Steel vs. Korea Information Communications | ||
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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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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