Correlation Between Lotte Energy and Xavis
Can any of the company-specific risk be diversified away by investing in both Lotte Energy and Xavis 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 Xavis 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 Xavis Co, you can compare the effects of market volatilities on Lotte Energy and Xavis 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 Xavis. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lotte Energy and Xavis.
Diversification Opportunities for Lotte Energy and Xavis
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Lotte and Xavis is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Lotte Energy Materials and Xavis Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xavis 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 Xavis. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xavis has no effect on the direction of Lotte Energy i.e., Lotte Energy and Xavis go up and down completely randomly.
Pair Corralation between Lotte Energy and Xavis
Assuming the 90 days trading horizon Lotte Energy Materials is expected to under-perform the Xavis. But the stock apears to be less risky and, when comparing its historical volatility, Lotte Energy Materials is 1.42 times less risky than Xavis. The stock trades about -0.04 of its potential returns per unit of risk. The Xavis Co is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 165,827 in Xavis Co on August 28, 2024 and sell it today you would lose (13,327) from holding Xavis Co or give up 8.04% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lotte Energy Materials vs. Xavis Co
Performance |
| Timeline |
| Lotte Energy Materials |
| Xavis |
Lotte Energy and Xavis Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lotte Energy and Xavis
The main advantage of trading using opposite Lotte Energy and Xavis positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lotte Energy position performs unexpectedly, Xavis 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 Xavis will offset losses from the drop in Xavis' long position.| Lotte Energy vs. Korea Real Estate | Lotte Energy vs. Korea Ratings Co | Lotte Energy vs. IQuest Co | Lotte Energy vs. Wonbang Tech Co |
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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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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