Correlation Between STI and Lotte Data
Can any of the company-specific risk be diversified away by investing in both STI 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 STI and Lotte Data into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between STI Co and Lotte Data Communication, you can compare the effects of market volatilities on STI 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 STI with a short position of Lotte Data. Check out your portfolio center. Please also check ongoing floating volatility patterns of STI and Lotte Data.
Diversification Opportunities for STI and Lotte Data
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between STI and Lotte is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding STI Co 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 STI 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 STI Co 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 STI i.e., STI and Lotte Data go up and down completely randomly.
Pair Corralation between STI and Lotte Data
Assuming the 90 days trading horizon STI Co is expected to under-perform the Lotte Data. In addition to that, STI is 1.4 times more volatile than Lotte Data Communication. It trades about -0.34 of its total potential returns per unit of risk. Lotte Data Communication is currently generating about -0.2 per unit of volatility. If you would invest 2,300,000 in Lotte Data Communication on August 31, 2024 and sell it today you would lose (255,000) from holding Lotte Data Communication or give up 11.09% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.65% |
| Values | Daily Returns |
STI Co vs. Lotte Data Communication
Performance |
| Timeline |
| STI Co |
| Lotte Data Communication |
STI and Lotte Data Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with STI and Lotte Data
The main advantage of trading using opposite STI and Lotte Data positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if STI 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.| STI vs. Ssangyong Information Communication | STI vs. Daishin Information Communications | STI vs. Daedong Metals Co | STI vs. Daesung Hi Tech 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
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