Correlation Between Geumhwa Plant and Lotte Data
Can any of the company-specific risk be diversified away by investing in both Geumhwa Plant 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 Geumhwa Plant and Lotte Data into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Geumhwa Plant Service and Lotte Data Communication, you can compare the effects of market volatilities on Geumhwa Plant 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 Geumhwa Plant with a short position of Lotte Data. Check out your portfolio center. Please also check ongoing floating volatility patterns of Geumhwa Plant and Lotte Data.
Diversification Opportunities for Geumhwa Plant and Lotte Data
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Geumhwa and Lotte is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Geumhwa Plant Service 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 Geumhwa Plant 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 Geumhwa Plant Service 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 Geumhwa Plant i.e., Geumhwa Plant and Lotte Data go up and down completely randomly.
Pair Corralation between Geumhwa Plant and Lotte Data
Assuming the 90 days trading horizon Geumhwa Plant Service is expected to generate 0.49 times more return on investment than Lotte Data. However, Geumhwa Plant Service is 2.04 times less risky than Lotte Data. It trades about -0.28 of its potential returns per unit of risk. Lotte Data Communication is currently generating about -0.23 per unit of risk. If you would invest 2,750,000 in Geumhwa Plant Service on September 1, 2024 and sell it today you would lose (210,000) from holding Geumhwa Plant Service or give up 7.64% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Geumhwa Plant Service vs. Lotte Data Communication
Performance |
| Timeline |
| Geumhwa Plant Service |
| Lotte Data Communication |
Geumhwa Plant and Lotte Data Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Geumhwa Plant and Lotte Data
The main advantage of trading using opposite Geumhwa Plant and Lotte Data positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Geumhwa Plant 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.| Geumhwa Plant vs. Korea New Network | Geumhwa Plant vs. ICD Co | Geumhwa Plant vs. DYPNF CoLtd | Geumhwa Plant vs. Busan Industrial Co |
| Lotte Data vs. SK Holdings Co | Lotte Data vs. Busan Industrial Co | Lotte Data vs. Busan Ind | Lotte Data vs. Mirae Asset Daewoo |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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