Correlation Between Lotte Energy and Hyundai Engineering
Can any of the company-specific risk be diversified away by investing in both Lotte Energy and Hyundai Engineering 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 Hyundai Engineering 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 Hyundai Engineering Plastics, you can compare the effects of market volatilities on Lotte Energy and Hyundai Engineering 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 Hyundai Engineering. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lotte Energy and Hyundai Engineering.
Diversification Opportunities for Lotte Energy and Hyundai Engineering
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Lotte and Hyundai is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Lotte Energy Materials and Hyundai Engineering Plastics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hyundai Engineering 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 Hyundai Engineering. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hyundai Engineering has no effect on the direction of Lotte Energy i.e., Lotte Energy and Hyundai Engineering go up and down completely randomly.
Pair Corralation between Lotte Energy and Hyundai Engineering
Assuming the 90 days trading horizon Lotte Energy Materials is expected to generate 5.72 times more return on investment than Hyundai Engineering. However, Lotte Energy is 5.72 times more volatile than Hyundai Engineering Plastics. It trades about 0.15 of its potential returns per unit of risk. Hyundai Engineering Plastics is currently generating about -0.05 per unit of risk. If you would invest 2,525,000 in Lotte Energy Materials on November 20, 2024 and sell it today you would earn a total of 270,000 from holding Lotte Energy Materials or generate 10.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lotte Energy Materials vs. Hyundai Engineering Plastics
Performance |
| Timeline |
| Lotte Energy Materials |
| Hyundai Engineering |
Lotte Energy and Hyundai Engineering Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lotte Energy and Hyundai Engineering
The main advantage of trading using opposite Lotte Energy and Hyundai Engineering positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lotte Energy position performs unexpectedly, Hyundai Engineering 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 Hyundai Engineering will offset losses from the drop in Hyundai Engineering's long position.| Lotte Energy vs. Korea Information Communications | Lotte Energy vs. Lotte Data Communication | Lotte Energy vs. Dongil Steel Co | Lotte Energy vs. KT Submarine Telecom |
| Hyundai Engineering vs. ABCO Electronics Co | Hyundai Engineering vs. DAEDUCK ELECTRONICS CoLtd | Hyundai Engineering vs. Samwha Electronics Co | Hyundai Engineering vs. Digital Multimedia 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.
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