Correlation Between Lotte Chemical and Hyundai Steel
Can any of the company-specific risk be diversified away by investing in both Lotte Chemical and Hyundai Steel 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 Hyundai Steel 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 Hyundai Steel, you can compare the effects of market volatilities on Lotte Chemical and Hyundai Steel 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 Hyundai Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lotte Chemical and Hyundai Steel.
Diversification Opportunities for Lotte Chemical and Hyundai Steel
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Lotte and Hyundai is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Lotte Chemical Corp and Hyundai Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hyundai Steel 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 Hyundai Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hyundai Steel has no effect on the direction of Lotte Chemical i.e., Lotte Chemical and Hyundai Steel go up and down completely randomly.
Pair Corralation between Lotte Chemical and Hyundai Steel
Assuming the 90 days trading horizon Lotte Chemical Corp is expected to under-perform the Hyundai Steel. In addition to that, Lotte Chemical is 1.3 times more volatile than Hyundai Steel. It trades about -0.07 of its total potential returns per unit of risk. Hyundai Steel is currently generating about -0.02 per unit of volatility. If you would invest 3,261,779 in Hyundai Steel on November 2, 2024 and sell it today you would lose (916,779) from holding Hyundai Steel or give up 28.11% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lotte Chemical Corp vs. Hyundai Steel
Performance |
| Timeline |
| Lotte Chemical Corp |
| Hyundai Steel |
Lotte Chemical and Hyundai Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lotte Chemical and Hyundai Steel
The main advantage of trading using opposite Lotte Chemical and Hyundai Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lotte Chemical position performs unexpectedly, Hyundai Steel 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 Hyundai Steel will offset losses from the drop in Hyundai Steel's long position.| Lotte Chemical vs. GS Retail Co | Lotte Chemical vs. Tway Air Co | Lotte Chemical vs. Dongil Metal Co | Lotte Chemical vs. Korean Air Lines |
| Hyundai Steel vs. Lotte Fine Chemical | Hyundai Steel vs. Kg Chemical | Hyundai Steel vs. Tae Kyung Chemical | Hyundai Steel vs. Adaptive Plasma 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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