Correlation Between Daishin Information and Lotte Energy
Can any of the company-specific risk be diversified away by investing in both Daishin Information and Lotte Energy 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 Daishin Information and Lotte Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Daishin Information Communications and Lotte Energy Materials, you can compare the effects of market volatilities on Daishin Information and Lotte Energy 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 Daishin Information with a short position of Lotte Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Daishin Information and Lotte Energy.
Diversification Opportunities for Daishin Information and Lotte Energy
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Daishin and Lotte is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Daishin Information Communicat and Lotte Energy Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lotte Energy Materials and Daishin Information 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 Daishin Information Communications are associated (or correlated) with Lotte Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lotte Energy Materials has no effect on the direction of Daishin Information i.e., Daishin Information and Lotte Energy go up and down completely randomly.
Pair Corralation between Daishin Information and Lotte Energy
Assuming the 90 days trading horizon Daishin Information Communications is expected to generate 0.58 times more return on investment than Lotte Energy. However, Daishin Information Communications is 1.72 times less risky than Lotte Energy. It trades about -0.03 of its potential returns per unit of risk. Lotte Energy Materials is currently generating about -0.64 per unit of risk. If you would invest 87,000 in Daishin Information Communications on September 2, 2024 and sell it today you would lose (1,100) from holding Daishin Information Communications or give up 1.26% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Daishin Information Communicat vs. Lotte Energy Materials
Performance |
| Timeline |
| Daishin Information |
| Lotte Energy Materials |
Daishin Information and Lotte Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Daishin Information and Lotte Energy
The main advantage of trading using opposite Daishin Information and Lotte Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Daishin Information position performs unexpectedly, Lotte Energy 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 Lotte Energy will offset losses from the drop in Lotte Energy's long position.| Daishin Information vs. Busan Industrial Co | Daishin Information vs. Busan Ind | Daishin Information vs. Mirae Asset Daewoo | Daishin Information vs. Finebesteel |
| Lotte Energy vs. Dongsin Engineering Construction | Lotte Energy vs. Doosan Fuel Cell | Lotte Energy vs. Daishin Balance 1 | Lotte Energy vs. Total Soft Bank |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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