Correlation Between SBI Investment and Lotte Chemical
Can any of the company-specific risk be diversified away by investing in both SBI Investment and Lotte Chemical 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 SBI Investment and Lotte Chemical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SBI Investment KOREA and Lotte Chemical Corp, you can compare the effects of market volatilities on SBI Investment and Lotte Chemical 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 SBI Investment with a short position of Lotte Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of SBI Investment and Lotte Chemical.
Diversification Opportunities for SBI Investment and Lotte Chemical
-0.22 | Correlation Coefficient |
Very good diversification
The 3 months correlation between SBI and Lotte is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding SBI Investment KOREA and Lotte Chemical Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lotte Chemical Corp and SBI Investment 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 SBI Investment KOREA are associated (or correlated) with Lotte Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lotte Chemical Corp has no effect on the direction of SBI Investment i.e., SBI Investment and Lotte Chemical go up and down completely randomly.
Pair Corralation between SBI Investment and Lotte Chemical
Assuming the 90 days trading horizon SBI Investment KOREA is expected to generate 0.82 times more return on investment than Lotte Chemical. However, SBI Investment KOREA is 1.21 times less risky than Lotte Chemical. It trades about -0.04 of its potential returns per unit of risk. Lotte Chemical Corp is currently generating about -0.07 per unit of risk. If you would invest 111,600 in SBI Investment KOREA on August 29, 2024 and sell it today you would lose (39,200) from holding SBI Investment KOREA or give up 35.13% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
SBI Investment KOREA vs. Lotte Chemical Corp
Performance |
| Timeline |
| SBI Investment KOREA |
| Lotte Chemical Corp |
SBI Investment and Lotte Chemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SBI Investment and Lotte Chemical
The main advantage of trading using opposite SBI Investment and Lotte Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SBI Investment position performs unexpectedly, Lotte Chemical 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 Chemical will offset losses from the drop in Lotte Chemical's long position.| SBI Investment vs. Daekyung Machinery Engineering | SBI Investment vs. PlayD Co | SBI Investment vs. Playgram Co | SBI Investment vs. Camus Engineering Construction |
| Lotte Chemical vs. Dongil Technology | Lotte Chemical vs. KG Eco Technology | Lotte Chemical vs. NewFlex Technology Co | Lotte Chemical vs. Eagle Veterinary Technology |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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