Correlation Between Booster and Lotte Chilsung
Can any of the company-specific risk be diversified away by investing in both Booster and Lotte Chilsung 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 Booster and Lotte Chilsung into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Booster Co and Lotte Chilsung Beverage, you can compare the effects of market volatilities on Booster and Lotte Chilsung 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 Booster with a short position of Lotte Chilsung. Check out your portfolio center. Please also check ongoing floating volatility patterns of Booster and Lotte Chilsung.
Diversification Opportunities for Booster and Lotte Chilsung
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Booster and Lotte is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Booster Co and Lotte Chilsung Beverage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lotte Chilsung Beverage and Booster 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 Booster Co are associated (or correlated) with Lotte Chilsung. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lotte Chilsung Beverage has no effect on the direction of Booster i.e., Booster and Lotte Chilsung go up and down completely randomly.
Pair Corralation between Booster and Lotte Chilsung
Assuming the 90 days trading horizon Booster Co is expected to under-perform the Lotte Chilsung. But the stock apears to be less risky and, when comparing its historical volatility, Booster Co is 1.25 times less risky than Lotte Chilsung. The stock trades about -0.06 of its potential returns per unit of risk. The Lotte Chilsung Beverage is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest 10,920,000 in Lotte Chilsung Beverage on September 13, 2024 and sell it today you would earn a total of 1,060,000 from holding Lotte Chilsung Beverage or generate 9.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Booster Co vs. Lotte Chilsung Beverage
Performance |
| Timeline |
| Booster |
| Lotte Chilsung Beverage |
Booster and Lotte Chilsung Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Booster and Lotte Chilsung
The main advantage of trading using opposite Booster and Lotte Chilsung positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Booster position performs unexpectedly, Lotte Chilsung 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 Chilsung will offset losses from the drop in Lotte Chilsung's long position.| Booster vs. Lotte Chilsung Beverage | Booster vs. Kyeryong Construction Industrial | Booster vs. Woorim Machinery Co | Booster vs. Hanshin Construction Co |
| Lotte Chilsung vs. Korea New Network | Lotte Chilsung vs. ICD Co | Lotte Chilsung vs. DYPNF CoLtd | Lotte Chilsung vs. Solution Advanced Technology |
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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