Correlation Between Lotte Chemical and WONIK Materials
Can any of the company-specific risk be diversified away by investing in both Lotte Chemical and WONIK Materials 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 WONIK Materials 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 WONIK Materials CoLtd, you can compare the effects of market volatilities on Lotte Chemical and WONIK Materials 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 WONIK Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lotte Chemical and WONIK Materials.
Diversification Opportunities for Lotte Chemical and WONIK Materials
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Lotte and WONIK is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Lotte Chemical Corp and WONIK Materials CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WONIK Materials CoLtd 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 WONIK Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WONIK Materials CoLtd has no effect on the direction of Lotte Chemical i.e., Lotte Chemical and WONIK Materials go up and down completely randomly.
Pair Corralation between Lotte Chemical and WONIK Materials
Assuming the 90 days trading horizon Lotte Chemical Corp is expected to under-perform the WONIK Materials. In addition to that, Lotte Chemical is 1.64 times more volatile than WONIK Materials CoLtd. It trades about -0.19 of its total potential returns per unit of risk. WONIK Materials CoLtd is currently generating about -0.2 per unit of volatility. If you would invest 2,385,000 in WONIK Materials CoLtd on September 13, 2024 and sell it today you would lose (529,000) from holding WONIK Materials CoLtd or give up 22.18% 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. WONIK Materials CoLtd
Performance |
| Timeline |
| Lotte Chemical Corp |
| WONIK Materials CoLtd |
Lotte Chemical and WONIK Materials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lotte Chemical and WONIK Materials
The main advantage of trading using opposite Lotte Chemical and WONIK Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lotte Chemical position performs unexpectedly, WONIK Materials 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 WONIK Materials will offset losses from the drop in WONIK Materials' long position.| Lotte Chemical vs. Sangsin Energy Display | Lotte Chemical vs. Aprogen Healthcare Games | Lotte Chemical vs. Kisan Telecom Co | Lotte Chemical vs. Osang Healthcare Co,Ltd |
| WONIK Materials vs. Soulbrain Holdings Co | WONIK Materials vs. Wonik Ips Co | WONIK Materials vs. TES Co | WONIK Materials vs. Suprema |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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