Correlation Between Lotte Chemical and Dongwon System
Can any of the company-specific risk be diversified away by investing in both Lotte Chemical and Dongwon System 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 Dongwon System 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 Dongwon System, you can compare the effects of market volatilities on Lotte Chemical and Dongwon System 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 Dongwon System. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lotte Chemical and Dongwon System.
Diversification Opportunities for Lotte Chemical and Dongwon System
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Lotte and Dongwon is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Lotte Chemical Corp and Dongwon System in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dongwon System 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 Dongwon System. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dongwon System has no effect on the direction of Lotte Chemical i.e., Lotte Chemical and Dongwon System go up and down completely randomly.
Pair Corralation between Lotte Chemical and Dongwon System
Assuming the 90 days trading horizon Lotte Chemical Corp is expected to under-perform the Dongwon System. But the stock apears to be less risky and, when comparing its historical volatility, Lotte Chemical Corp is 1.05 times less risky than Dongwon System. The stock trades about -0.06 of its potential returns per unit of risk. The Dongwon System is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest 4,651,284 in Dongwon System on November 27, 2024 and sell it today you would lose (681,284) from holding Dongwon System or give up 14.65% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lotte Chemical Corp vs. Dongwon System
Performance |
| Timeline |
| Lotte Chemical Corp |
| Dongwon System |
Lotte Chemical and Dongwon System Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lotte Chemical and Dongwon System
The main advantage of trading using opposite Lotte Chemical and Dongwon System positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lotte Chemical position performs unexpectedly, Dongwon System 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 Dongwon System will offset losses from the drop in Dongwon System's long position.| Lotte Chemical vs. Coloray International Investment | Lotte Chemical vs. Sempio Foods Co | Lotte Chemical vs. Namyang Dairy | Lotte Chemical vs. Sangsangin Investment Securities |
| Dongwon System vs. DB Financial Investment | Dongwon System vs. KakaoBank Corp | Dongwon System vs. Shinhan Inverse Silver | Dongwon System vs. DoubleU Games Co |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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