Correlation Between Lotte Energy and Korea Steel
Can any of the company-specific risk be diversified away by investing in both Lotte Energy and Korea Steel 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 Energy and Korea Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lotte Energy Materials and Korea Steel Co, you can compare the effects of market volatilities on Lotte Energy and Korea Steel 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 Energy with a short position of Korea Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lotte Energy and Korea Steel.
Diversification Opportunities for Lotte Energy and Korea Steel
-0.09 | Correlation Coefficient |
Good diversification
The 3 months correlation between Lotte and Korea is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Lotte Energy Materials and Korea Steel Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Korea Steel and Lotte Energy 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 Energy Materials are associated (or correlated) with Korea Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Korea Steel has no effect on the direction of Lotte Energy i.e., Lotte Energy and Korea Steel go up and down completely randomly.
Pair Corralation between Lotte Energy and Korea Steel
Assuming the 90 days trading horizon Lotte Energy Materials is expected to generate 3.46 times more return on investment than Korea Steel. However, Lotte Energy is 3.46 times more volatile than Korea Steel Co. It trades about 0.32 of its potential returns per unit of risk. Korea Steel Co is currently generating about 0.02 per unit of risk. If you would invest 2,420,000 in Lotte Energy Materials on November 22, 2024 and sell it today you would earn a total of 630,000 from holding Lotte Energy Materials or generate 26.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lotte Energy Materials vs. Korea Steel Co
Performance |
| Timeline |
| Lotte Energy Materials |
| Korea Steel |
Lotte Energy and Korea Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lotte Energy and Korea Steel
The main advantage of trading using opposite Lotte Energy and Korea Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lotte Energy position performs unexpectedly, Korea Steel 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 Korea Steel will offset losses from the drop in Korea Steel's long position.| Lotte Energy vs. SCI Information Service | Lotte Energy vs. Playgram Co | Lotte Energy vs. Jeju Air Co | Lotte Energy vs. Korea Information Engineering |
| Korea Steel vs. Netmarble Games Corp | Korea Steel vs. Seoul Electronics Telecom | Korea Steel vs. ECSTELECOM Co | Korea Steel 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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