Correlation Between Korea Real and Lotte Non-Life
Can any of the company-specific risk be diversified away by investing in both Korea Real and Lotte Non-Life 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 Korea Real and Lotte Non-Life into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Korea Real Estate and Lotte Non Life, you can compare the effects of market volatilities on Korea Real and Lotte Non-Life 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 Korea Real with a short position of Lotte Non-Life. Check out your portfolio center. Please also check ongoing floating volatility patterns of Korea Real and Lotte Non-Life.
Diversification Opportunities for Korea Real and Lotte Non-Life
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Korea and Lotte is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Korea Real Estate and Lotte Non Life in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lotte Non Life and Korea Real 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 Korea Real Estate are associated (or correlated) with Lotte Non-Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lotte Non Life has no effect on the direction of Korea Real i.e., Korea Real and Lotte Non-Life go up and down completely randomly.
Pair Corralation between Korea Real and Lotte Non-Life
Assuming the 90 days trading horizon Korea Real Estate is expected to generate 0.26 times more return on investment than Lotte Non-Life. However, Korea Real Estate is 3.78 times less risky than Lotte Non-Life. It trades about -0.16 of its potential returns per unit of risk. Lotte Non Life is currently generating about -0.14 per unit of risk. If you would invest 108,000 in Korea Real Estate on September 13, 2024 and sell it today you would lose (5,300) from holding Korea Real Estate or give up 4.91% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Korea Real Estate vs. Lotte Non Life
Performance |
| Timeline |
| Korea Real Estate |
| Lotte Non Life |
Korea Real and Lotte Non-Life Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Korea Real and Lotte Non-Life
The main advantage of trading using opposite Korea Real and Lotte Non-Life positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Korea Real position performs unexpectedly, Lotte Non-Life 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 Non-Life will offset losses from the drop in Lotte Non-Life's long position.| Korea Real vs. Daol Investment Securities | Korea Real vs. SBI Investment KOREA | Korea Real vs. LB Investment | Korea Real vs. Nh Investment And |
| Lotte Non-Life vs. KB Financial Group | Lotte Non-Life vs. Shinhan Financial Group | Lotte Non-Life vs. Hana Financial | Lotte Non-Life vs. Woori Financial Group |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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