Correlation Between Korea Information and Lotte Data
Can any of the company-specific risk be diversified away by investing in both Korea Information 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 Korea Information and Lotte Data into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Korea Information Engineering and Lotte Data Communication, you can compare the effects of market volatilities on Korea Information 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 Korea Information with a short position of Lotte Data. Check out your portfolio center. Please also check ongoing floating volatility patterns of Korea Information and Lotte Data.
Diversification Opportunities for Korea Information and Lotte Data
0.46 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Korea and Lotte is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Korea Information Engineering 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 Korea 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 Korea Information Engineering 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 Korea Information i.e., Korea Information and Lotte Data go up and down completely randomly.
Pair Corralation between Korea Information and Lotte Data
Assuming the 90 days trading horizon Korea Information Engineering is expected to under-perform the Lotte Data. But the stock apears to be less risky and, when comparing its historical volatility, Korea Information Engineering is 1.64 times less risky than Lotte Data. The stock trades about -0.36 of its potential returns per unit of risk. The Lotte Data Communication is currently generating about -0.19 of returns per unit of risk over similar time horizon. If you would invest 2,260,000 in Lotte Data Communication on August 25, 2024 and sell it today you would lose (245,000) from holding Lotte Data Communication or give up 10.84% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Korea Information Engineering vs. Lotte Data Communication
Performance |
| Timeline |
| Korea Information |
| Lotte Data Communication |
Korea Information and Lotte Data Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Korea Information and Lotte Data
The main advantage of trading using opposite Korea Information and Lotte Data positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Korea Information 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.| Korea Information vs. DSC Investment | Korea Information vs. Netmarble Games Corp | Korea Information vs. Korea Investment Holdings | Korea Information vs. InnoTherapy |
| Lotte Data vs. SCI Information Service | Lotte Data vs. DataSolution | Lotte Data vs. Koryo Credit Information | Lotte Data vs. Seoul Electronics Telecom |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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