Correlation Between Lotte Chemical and POSCO M
Can any of the company-specific risk be diversified away by investing in both Lotte Chemical and POSCO M 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 M 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 M TECH Co, you can compare the effects of market volatilities on Lotte Chemical and POSCO M 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 M. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lotte Chemical and POSCO M.
Diversification Opportunities for Lotte Chemical and POSCO M
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Lotte and POSCO is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Lotte Chemical Corp and POSCO M TECH Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on POSCO M TECH 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 M. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of POSCO M TECH has no effect on the direction of Lotte Chemical i.e., Lotte Chemical and POSCO M go up and down completely randomly.
Pair Corralation between Lotte Chemical and POSCO M
Assuming the 90 days trading horizon Lotte Chemical Corp is expected to under-perform the POSCO M. In addition to that, Lotte Chemical is 1.65 times more volatile than POSCO M TECH Co. It trades about -0.32 of its total potential returns per unit of risk. POSCO M TECH Co is currently generating about -0.17 per unit of volatility. If you would invest 1,630,000 in POSCO M TECH Co on August 29, 2024 and sell it today you would lose (170,000) from holding POSCO M TECH Co or give up 10.43% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lotte Chemical Corp vs. POSCO M TECH Co
Performance |
| Timeline |
| Lotte Chemical Corp |
| POSCO M TECH |
Lotte Chemical and POSCO M Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lotte Chemical and POSCO M
The main advantage of trading using opposite Lotte Chemical and POSCO M positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lotte Chemical position performs unexpectedly, POSCO M 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 M will offset losses from the drop in POSCO M's long position.| Lotte Chemical vs. Dongil Technology | Lotte Chemical vs. KG Eco Technology | Lotte Chemical vs. NewFlex Technology Co | Lotte Chemical vs. Eagle Veterinary Technology |
| POSCO M vs. LG Chemicals | POSCO M vs. Lotte Chemical Corp | POSCO M vs. Hyundai Steel | POSCO M vs. Seah Steel 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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