Correlation Between Barunson Entertainment and Lotte Data
Can any of the company-specific risk be diversified away by investing in both Barunson Entertainment and Lotte Data 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 Barunson Entertainment and Lotte Data into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Barunson Entertainment Arts and Lotte Data Communication, you can compare the effects of market volatilities on Barunson Entertainment and Lotte Data 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 Barunson Entertainment with a short position of Lotte Data. Check out your portfolio center. Please also check ongoing floating volatility patterns of Barunson Entertainment and Lotte Data.
Diversification Opportunities for Barunson Entertainment and Lotte Data
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Barunson and Lotte is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Barunson Entertainment Arts and Lotte Data Communication in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lotte Data Communication and Barunson Entertainment 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 Barunson Entertainment Arts are associated (or correlated) with Lotte Data. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lotte Data Communication has no effect on the direction of Barunson Entertainment i.e., Barunson Entertainment and Lotte Data go up and down completely randomly.
Pair Corralation between Barunson Entertainment and Lotte Data
Assuming the 90 days trading horizon Barunson Entertainment Arts is expected to under-perform the Lotte Data. But the stock apears to be less risky and, when comparing its historical volatility, Barunson Entertainment Arts is 1.23 times less risky than Lotte Data. The stock trades about -0.06 of its potential returns per unit of risk. The Lotte Data Communication is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest 2,555,154 in Lotte Data Communication on October 13, 2024 and sell it today you would lose (465,154) from holding Lotte Data Communication or give up 18.2% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Barunson Entertainment Arts vs. Lotte Data Communication
Performance |
| Timeline |
| Barunson Entertainment |
| Lotte Data Communication |
Barunson Entertainment and Lotte Data Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Barunson Entertainment and Lotte Data
The main advantage of trading using opposite Barunson Entertainment and Lotte Data positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Barunson Entertainment position performs unexpectedly, Lotte Data 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 Data will offset losses from the drop in Lotte Data's long position.The idea behind Barunson Entertainment Arts and Lotte Data Communication pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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