Correlation Between Lotte Energy and Namhwa Industrial
Can any of the company-specific risk be diversified away by investing in both Lotte Energy and Namhwa Industrial 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 Namhwa Industrial 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 Namhwa Industrial Co, you can compare the effects of market volatilities on Lotte Energy and Namhwa Industrial 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 Namhwa Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lotte Energy and Namhwa Industrial.
Diversification Opportunities for Lotte Energy and Namhwa Industrial
-0.7 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Lotte and Namhwa is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Lotte Energy Materials and Namhwa Industrial Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Namhwa Industrial 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 Namhwa Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Namhwa Industrial has no effect on the direction of Lotte Energy i.e., Lotte Energy and Namhwa Industrial go up and down completely randomly.
Pair Corralation between Lotte Energy and Namhwa Industrial
Assuming the 90 days trading horizon Lotte Energy Materials is expected to under-perform the Namhwa Industrial. In addition to that, Lotte Energy is 1.49 times more volatile than Namhwa Industrial Co. It trades about -0.6 of its total potential returns per unit of risk. Namhwa Industrial Co is currently generating about -0.11 per unit of volatility. If you would invest 547,000 in Namhwa Industrial Co on September 4, 2024 and sell it today you would lose (27,000) from holding Namhwa Industrial Co or give up 4.94% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lotte Energy Materials vs. Namhwa Industrial Co
Performance |
| Timeline |
| Lotte Energy Materials |
| Namhwa Industrial |
Lotte Energy and Namhwa Industrial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lotte Energy and Namhwa Industrial
The main advantage of trading using opposite Lotte Energy and Namhwa Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lotte Energy position performs unexpectedly, Namhwa Industrial 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 Namhwa Industrial will offset losses from the drop in Namhwa Industrial'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 |
| Namhwa Industrial vs. Korea Investment Holdings | Namhwa Industrial vs. Namhae Chemical | Namhwa Industrial vs. Dongnam Chemical Co | Namhwa Industrial vs. Cloud Air CoLtd |
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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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