Correlation Between Lotte Chemical and Daehan Steel
Can any of the company-specific risk be diversified away by investing in both Lotte Chemical and Daehan 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 Daehan 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 Daehan Steel, you can compare the effects of market volatilities on Lotte Chemical and Daehan 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 Daehan Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lotte Chemical and Daehan Steel.
Diversification Opportunities for Lotte Chemical and Daehan Steel
-0.85 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Lotte and Daehan is -0.85. Overlapping area represents the amount of risk that can be diversified away by holding Lotte Chemical Corp and Daehan Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daehan 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 Daehan Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daehan Steel has no effect on the direction of Lotte Chemical i.e., Lotte Chemical and Daehan Steel go up and down completely randomly.
Pair Corralation between Lotte Chemical and Daehan Steel
Assuming the 90 days trading horizon Lotte Chemical Corp is expected to under-perform the Daehan Steel. In addition to that, Lotte Chemical is 1.27 times more volatile than Daehan Steel. It trades about -0.13 of its total potential returns per unit of risk. Daehan Steel is currently generating about 0.0 per unit of volatility. If you would invest 1,664,000 in Daehan Steel on October 25, 2024 and sell it today you would lose (2,000) from holding Daehan Steel or give up 0.12% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lotte Chemical Corp vs. Daehan Steel
Performance |
| Timeline |
| Lotte Chemical Corp |
| Daehan Steel |
Lotte Chemical and Daehan Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lotte Chemical and Daehan Steel
The main advantage of trading using opposite Lotte Chemical and Daehan Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lotte Chemical position performs unexpectedly, Daehan 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 Daehan Steel will offset losses from the drop in Daehan Steel's long position.| Lotte Chemical vs. INNOX Advanced Materials | Lotte Chemical vs. Netmarble Games Corp | Lotte Chemical vs. DoubleU Games Co | Lotte Chemical vs. Lake Materials Co |
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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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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