Correlation Between Lotte Energy and GaeaSoft Corp
Can any of the company-specific risk be diversified away by investing in both Lotte Energy and GaeaSoft Corp 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 GaeaSoft Corp 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 GaeaSoft Corp, you can compare the effects of market volatilities on Lotte Energy and GaeaSoft Corp 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 GaeaSoft Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lotte Energy and GaeaSoft Corp.
Diversification Opportunities for Lotte Energy and GaeaSoft Corp
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Lotte and GaeaSoft is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Lotte Energy Materials and GaeaSoft Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GaeaSoft Corp 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 GaeaSoft Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GaeaSoft Corp has no effect on the direction of Lotte Energy i.e., Lotte Energy and GaeaSoft Corp go up and down completely randomly.
Pair Corralation between Lotte Energy and GaeaSoft Corp
Assuming the 90 days trading horizon Lotte Energy Materials is expected to under-perform the GaeaSoft Corp. In addition to that, Lotte Energy is 1.5 times more volatile than GaeaSoft Corp. It trades about -0.6 of its total potential returns per unit of risk. GaeaSoft Corp is currently generating about -0.21 per unit of volatility. If you would invest 933,000 in GaeaSoft Corp on September 5, 2024 and sell it today you would lose (86,000) from holding GaeaSoft Corp or give up 9.22% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Lotte Energy Materials vs. GaeaSoft Corp
Performance |
| Timeline |
| Lotte Energy Materials |
| GaeaSoft Corp |
Lotte Energy and GaeaSoft Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lotte Energy and GaeaSoft Corp
The main advantage of trading using opposite Lotte Energy and GaeaSoft Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lotte Energy position performs unexpectedly, GaeaSoft Corp 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 GaeaSoft Corp will offset losses from the drop in GaeaSoft Corp's long position.| Lotte Energy vs. Daishin Information Communications | Lotte Energy vs. Daou Data Corp | Lotte Energy vs. PJ Metal Co | Lotte Energy vs. DataSolution |
| GaeaSoft Corp vs. EV Advanced Material | GaeaSoft Corp vs. Kaonmedia Co | GaeaSoft Corp vs. Wireless Power Amplifier | GaeaSoft Corp 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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