Correlation Between Lotte Energy and Daewon Chemical
Can any of the company-specific risk be diversified away by investing in both Lotte Energy and Daewon 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 Lotte Energy and Daewon Chemical 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 Daewon Chemical Co, you can compare the effects of market volatilities on Lotte Energy and Daewon 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 Lotte Energy with a short position of Daewon Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lotte Energy and Daewon Chemical.
Diversification Opportunities for Lotte Energy and Daewon Chemical
0.56 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Lotte and Daewon is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Lotte Energy Materials and Daewon Chemical Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daewon Chemical 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 Daewon Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daewon Chemical has no effect on the direction of Lotte Energy i.e., Lotte Energy and Daewon Chemical go up and down completely randomly.
Pair Corralation between Lotte Energy and Daewon Chemical
Assuming the 90 days trading horizon Lotte Energy Materials is expected to under-perform the Daewon Chemical. But the stock apears to be less risky and, when comparing its historical volatility, Lotte Energy Materials is 2.82 times less risky than Daewon Chemical. The stock trades about -0.68 of its potential returns per unit of risk. The Daewon Chemical Co is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 106,500 in Daewon Chemical Co on September 3, 2024 and sell it today you would earn a total of 8,700 from holding Daewon Chemical Co or generate 8.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lotte Energy Materials vs. Daewon Chemical Co
Performance |
| Timeline |
| Lotte Energy Materials |
| Daewon Chemical |
Lotte Energy and Daewon Chemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lotte Energy and Daewon Chemical
The main advantage of trading using opposite Lotte Energy and Daewon Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lotte Energy position performs unexpectedly, Daewon 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 Daewon Chemical will offset losses from the drop in Daewon Chemical's long position.| Lotte Energy vs. Dongsin Engineering Construction | Lotte Energy vs. Doosan Fuel Cell | Lotte Energy vs. Daishin Balance 1 | Lotte Energy vs. Total Soft Bank |
| Daewon Chemical vs. Daejoo Electronic Materials | Daewon Chemical vs. Phoenix Materials Co | Daewon Chemical vs. INNOX Advanced Materials | Daewon Chemical vs. Lotte Energy Materials |
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 Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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