Correlation Between Lotte Chemical and POSCO Holdings
Can any of the company-specific risk be diversified away by investing in both Lotte Chemical and POSCO Holdings 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 POSCO Holdings 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 POSCO Holdings, you can compare the effects of market volatilities on Lotte Chemical and POSCO Holdings 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 POSCO Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lotte Chemical and POSCO Holdings.
Diversification Opportunities for Lotte Chemical and POSCO Holdings
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Lotte and POSCO is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Lotte Chemical Corp and POSCO Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on POSCO Holdings 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 POSCO Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of POSCO Holdings has no effect on the direction of Lotte Chemical i.e., Lotte Chemical and POSCO Holdings go up and down completely randomly.
Pair Corralation between Lotte Chemical and POSCO Holdings
Assuming the 90 days trading horizon Lotte Chemical Corp is expected to under-perform the POSCO Holdings. But the stock apears to be less risky and, when comparing its historical volatility, Lotte Chemical Corp is 1.04 times less risky than POSCO Holdings. The stock trades about -0.07 of its potential returns per unit of risk. The POSCO Holdings is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 28,719,600 in POSCO Holdings on November 1, 2024 and sell it today you would lose (2,569,600) from holding POSCO Holdings or give up 8.95% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lotte Chemical Corp vs. POSCO Holdings
Performance |
| Timeline |
| Lotte Chemical Corp |
| POSCO Holdings |
Lotte Chemical and POSCO Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lotte Chemical and POSCO Holdings
The main advantage of trading using opposite Lotte Chemical and POSCO Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lotte Chemical position performs unexpectedly, POSCO Holdings 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 POSCO Holdings will offset losses from the drop in POSCO Holdings' long position.| Lotte Chemical vs. SCI Information Service | Lotte Chemical vs. Lotte Chilsung Beverage | Lotte Chemical vs. System and Application | Lotte Chemical vs. Namhwa Industrial Co |
| POSCO Holdings vs. Seoul Semiconductor Co | POSCO Holdings vs. Cuckoo Homesys Co | POSCO Holdings vs. Isu Chemical Co | POSCO Holdings vs. Kyung In Synthetic Corp |
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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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