Correlation Between Lotte Chemical and Kg Chemical
Can any of the company-specific risk be diversified away by investing in both Lotte Chemical and Kg Chemical 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 Chemical and Kg Chemical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lotte Chemical Corp and Kg Chemical, you can compare the effects of market volatilities on Lotte Chemical and Kg Chemical 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 Chemical with a short position of Kg Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lotte Chemical and Kg Chemical.
Diversification Opportunities for Lotte Chemical and Kg Chemical
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Lotte and 001390 is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Lotte Chemical Corp and Kg Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kg Chemical and Lotte Chemical 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 Chemical Corp are associated (or correlated) with Kg Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kg Chemical has no effect on the direction of Lotte Chemical i.e., Lotte Chemical and Kg Chemical go up and down completely randomly.
Pair Corralation between Lotte Chemical and Kg Chemical
Assuming the 90 days trading horizon Lotte Chemical is expected to generate 2.23 times less return on investment than Kg Chemical. In addition to that, Lotte Chemical is 1.72 times more volatile than Kg Chemical. It trades about 0.12 of its total potential returns per unit of risk. Kg Chemical is currently generating about 0.44 per unit of volatility. If you would invest 324,520 in Kg Chemical on October 10, 2024 and sell it today you would earn a total of 59,480 from holding Kg Chemical or generate 18.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lotte Chemical Corp vs. Kg Chemical
Performance |
| Timeline |
| Lotte Chemical Corp |
| Kg Chemical |
Lotte Chemical and Kg Chemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lotte Chemical and Kg Chemical
The main advantage of trading using opposite Lotte Chemical and Kg Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lotte Chemical position performs unexpectedly, Kg Chemical 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 Kg Chemical will offset losses from the drop in Kg Chemical's long position.| Lotte Chemical vs. INSUN Environmental New | Lotte Chemical vs. Seah Steel Corp | Lotte Chemical vs. Koryo Credit Information | Lotte Chemical vs. KB Financial Group |
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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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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