Correlation Between Dongbu Steel and Lotte Reit
Can any of the company-specific risk be diversified away by investing in both Dongbu Steel and Lotte Reit 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 Dongbu Steel and Lotte Reit into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dongbu Steel Co and Lotte Reit Co, you can compare the effects of market volatilities on Dongbu Steel and Lotte Reit 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 Dongbu Steel with a short position of Lotte Reit. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dongbu Steel and Lotte Reit.
Diversification Opportunities for Dongbu Steel and Lotte Reit
-0.04 | Correlation Coefficient |
Good diversification
The 3 months correlation between Dongbu and Lotte is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Dongbu Steel Co and Lotte Reit Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lotte Reit and Dongbu Steel 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 Dongbu Steel Co are associated (or correlated) with Lotte Reit. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lotte Reit has no effect on the direction of Dongbu Steel i.e., Dongbu Steel and Lotte Reit go up and down completely randomly.
Pair Corralation between Dongbu Steel and Lotte Reit
Assuming the 90 days trading horizon Dongbu Steel Co is expected to under-perform the Lotte Reit. In addition to that, Dongbu Steel is 1.64 times more volatile than Lotte Reit Co. It trades about -0.06 of its total potential returns per unit of risk. Lotte Reit Co is currently generating about -0.06 per unit of volatility. If you would invest 319,000 in Lotte Reit Co on September 13, 2024 and sell it today you would lose (10,500) from holding Lotte Reit Co or give up 3.29% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Dongbu Steel Co vs. Lotte Reit Co
Performance |
| Timeline |
| Dongbu Steel |
| Lotte Reit |
Dongbu Steel and Lotte Reit Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dongbu Steel and Lotte Reit
The main advantage of trading using opposite Dongbu Steel and Lotte Reit positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dongbu Steel position performs unexpectedly, Lotte Reit 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 Lotte Reit will offset losses from the drop in Lotte Reit's long position.| Dongbu Steel vs. LG Chemicals | Dongbu Steel vs. POSCO Holdings | Dongbu Steel vs. Hanwha Solutions | Dongbu Steel vs. Lotte Chemical Corp |
| Lotte Reit vs. SK Telecom Co | Lotte Reit vs. Hankuk Steel Wire | Lotte Reit vs. Wonil Special Steel | Lotte Reit vs. Nable Communications |
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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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