Correlation Between Lotte Chemical and Lake Materials
Can any of the company-specific risk be diversified away by investing in both Lotte Chemical and Lake 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 Lake 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 Lake Materials Co, you can compare the effects of market volatilities on Lotte Chemical and Lake 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 Lake Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lotte Chemical and Lake Materials.
Diversification Opportunities for Lotte Chemical and Lake Materials
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Lotte and Lake is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Lotte Chemical Corp and Lake Materials Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lake Materials 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 Lake Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lake Materials has no effect on the direction of Lotte Chemical i.e., Lotte Chemical and Lake Materials go up and down completely randomly.
Pair Corralation between Lotte Chemical and Lake Materials
Assuming the 90 days trading horizon Lotte Chemical Corp is expected to under-perform the Lake Materials. In addition to that, Lotte Chemical is 1.56 times more volatile than Lake Materials Co. It trades about -0.28 of its total potential returns per unit of risk. Lake Materials Co is currently generating about -0.27 per unit of volatility. If you would invest 1,420,000 in Lake Materials Co on August 25, 2024 and sell it today you would lose (248,000) from holding Lake Materials Co or give up 17.46% 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. Lake Materials Co
Performance |
| Timeline |
| Lotte Chemical Corp |
| Lake Materials |
Lotte Chemical and Lake Materials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lotte Chemical and Lake Materials
The main advantage of trading using opposite Lotte Chemical and Lake Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lotte Chemical position performs unexpectedly, Lake 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 Lake Materials will offset losses from the drop in Lake Materials' long position.| Lotte Chemical vs. Lake Materials Co | Lotte Chemical vs. LB Investment | Lotte Chemical vs. SBI Investment KOREA | Lotte Chemical vs. Hana Materials |
| Lake Materials vs. Samsung Electronics Co | Lake Materials vs. Samsung Electronics Co | Lake Materials vs. LG Energy Solution | Lake Materials vs. SK Hynix |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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