Correlation Between Lotte Energy and EBEST Investment
Can any of the company-specific risk be diversified away by investing in both Lotte Energy and EBEST Investment 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 EBEST Investment 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 EBEST Investment Securities, you can compare the effects of market volatilities on Lotte Energy and EBEST Investment 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 EBEST Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lotte Energy and EBEST Investment.
Diversification Opportunities for Lotte Energy and EBEST Investment
0.56 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Lotte and EBEST is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Lotte Energy Materials and EBEST Investment Securities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EBEST Investment Sec 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 EBEST Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EBEST Investment Sec has no effect on the direction of Lotte Energy i.e., Lotte Energy and EBEST Investment go up and down completely randomly.
Pair Corralation between Lotte Energy and EBEST Investment
Assuming the 90 days trading horizon Lotte Energy Materials is expected to under-perform the EBEST Investment. In addition to that, Lotte Energy is 1.72 times more volatile than EBEST Investment Securities. It trades about -0.02 of its total potential returns per unit of risk. EBEST Investment Securities is currently generating about 0.01 per unit of volatility. If you would invest 421,517 in EBEST Investment Securities on August 27, 2024 and sell it today you would lose (5,517) from holding EBEST Investment Securities or give up 1.31% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lotte Energy Materials vs. EBEST Investment Securities
Performance |
| Timeline |
| Lotte Energy Materials |
| EBEST Investment Sec |
Lotte Energy and EBEST Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lotte Energy and EBEST Investment
The main advantage of trading using opposite Lotte Energy and EBEST Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lotte Energy position performs unexpectedly, EBEST Investment 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 EBEST Investment will offset losses from the drop in EBEST Investment's long position.| Lotte Energy vs. Inzi Display CoLtd | Lotte Energy vs. Digital Power Communications | Lotte Energy vs. Lotte Data Communication | Lotte Energy vs. Hankook Furniture Co |
| EBEST Investment vs. Hana Materials | EBEST Investment vs. NewFlex Technology Co | EBEST Investment vs. EV Advanced Material | EBEST Investment 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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