Correlation Between Lotte Chemical and Ecopro
Can any of the company-specific risk be diversified away by investing in both Lotte Chemical and Ecopro 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 Ecopro 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 Ecopro Co, you can compare the effects of market volatilities on Lotte Chemical and Ecopro 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 Ecopro. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lotte Chemical and Ecopro.
Diversification Opportunities for Lotte Chemical and Ecopro
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Lotte and Ecopro is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Lotte Chemical Corp and Ecopro Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ecopro 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 Ecopro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ecopro has no effect on the direction of Lotte Chemical i.e., Lotte Chemical and Ecopro go up and down completely randomly.
Pair Corralation between Lotte Chemical and Ecopro
Assuming the 90 days trading horizon Lotte Chemical Corp is expected to under-perform the Ecopro. But the stock apears to be less risky and, when comparing its historical volatility, Lotte Chemical Corp is 2.35 times less risky than Ecopro. The stock trades about -0.27 of its potential returns per unit of risk. The Ecopro Co is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest 6,370,000 in Ecopro Co on October 21, 2024 and sell it today you would lose (140,000) from holding Ecopro Co or give up 2.2% 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. Ecopro Co
Performance |
| Timeline |
| Lotte Chemical Corp |
| Ecopro |
Lotte Chemical and Ecopro Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lotte Chemical and Ecopro
The main advantage of trading using opposite Lotte Chemical and Ecopro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lotte Chemical position performs unexpectedly, Ecopro 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 Ecopro will offset losses from the drop in Ecopro's long position.| Lotte Chemical vs. Fine Besteel Co | Lotte Chemical vs. Hanil Chemical Ind | Lotte Chemical vs. Miwon Chemical | Lotte Chemical vs. Cloud Air CoLtd |
| Ecopro vs. LG Chemicals | Ecopro vs. POSCO Holdings | Ecopro vs. Lotte Chemical Corp | Ecopro vs. Hyundai Steel |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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