Correlation Between Lotte Chemical and Hanmi Semiconductor
Can any of the company-specific risk be diversified away by investing in both Lotte Chemical and Hanmi Semiconductor 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 Hanmi Semiconductor 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 Hanmi Semiconductor Co, you can compare the effects of market volatilities on Lotte Chemical and Hanmi Semiconductor 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 Hanmi Semiconductor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lotte Chemical and Hanmi Semiconductor.
Diversification Opportunities for Lotte Chemical and Hanmi Semiconductor
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Lotte and Hanmi is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Lotte Chemical Corp and Hanmi Semiconductor Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hanmi Semiconductor 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 Hanmi Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hanmi Semiconductor has no effect on the direction of Lotte Chemical i.e., Lotte Chemical and Hanmi Semiconductor go up and down completely randomly.
Pair Corralation between Lotte Chemical and Hanmi Semiconductor
Assuming the 90 days trading horizon Lotte Chemical Corp is expected to under-perform the Hanmi Semiconductor. In addition to that, Lotte Chemical is 2.01 times more volatile than Hanmi Semiconductor Co. It trades about -0.2 of its total potential returns per unit of risk. Hanmi Semiconductor Co is currently generating about -0.4 per unit of volatility. If you would invest 8,810,000 in Hanmi Semiconductor Co on September 12, 2024 and sell it today you would lose (1,710,000) from holding Hanmi Semiconductor Co or give up 19.41% 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. Hanmi Semiconductor Co
Performance |
| Timeline |
| Lotte Chemical Corp |
| Hanmi Semiconductor |
Lotte Chemical and Hanmi Semiconductor Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lotte Chemical and Hanmi Semiconductor
The main advantage of trading using opposite Lotte Chemical and Hanmi Semiconductor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lotte Chemical position performs unexpectedly, Hanmi Semiconductor 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 Hanmi Semiconductor will offset losses from the drop in Hanmi Semiconductor's long position.| Lotte Chemical vs. LG Chemicals | Lotte Chemical vs. POSCO Holdings | Lotte Chemical vs. Hanwha Solutions | Lotte Chemical vs. Hyundai Steel |
| Hanmi Semiconductor vs. Dongbang Transport Logistics | Hanmi Semiconductor vs. Shinhan Financial Group | Hanmi Semiconductor vs. Alton Sports CoLtd | Hanmi Semiconductor vs. Lotte Non Life Insurance |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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