Correlation Between HLB Power and Lotte Energy
Can any of the company-specific risk be diversified away by investing in both HLB Power and Lotte Energy 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 HLB Power and Lotte Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between HLB Power Co and Lotte Energy Materials, you can compare the effects of market volatilities on HLB Power and Lotte Energy 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 HLB Power with a short position of Lotte Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of HLB Power and Lotte Energy.
Diversification Opportunities for HLB Power and Lotte Energy
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between HLB and Lotte is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding HLB Power Co and Lotte Energy Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lotte Energy Materials and HLB Power 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 HLB Power Co are associated (or correlated) with Lotte Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lotte Energy Materials has no effect on the direction of HLB Power i.e., HLB Power and Lotte Energy go up and down completely randomly.
Pair Corralation between HLB Power and Lotte Energy
Assuming the 90 days trading horizon HLB Power Co is expected to generate 1.39 times more return on investment than Lotte Energy. However, HLB Power is 1.39 times more volatile than Lotte Energy Materials. It trades about -0.09 of its potential returns per unit of risk. Lotte Energy Materials is currently generating about -0.14 per unit of risk. If you would invest 80,600 in HLB Power Co on September 1, 2024 and sell it today you would lose (40,700) from holding HLB Power Co or give up 50.5% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
HLB Power Co vs. Lotte Energy Materials
Performance |
| Timeline |
| HLB Power |
| Lotte Energy Materials |
HLB Power and Lotte Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HLB Power and Lotte Energy
The main advantage of trading using opposite HLB Power and Lotte Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HLB Power position performs unexpectedly, Lotte Energy 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 Energy will offset losses from the drop in Lotte Energy's long position.| HLB Power vs. Korea New Network | HLB Power vs. ICD Co | HLB Power vs. DYPNF CoLtd | HLB Power vs. Busan Industrial Co |
| Lotte Energy vs. Dongsin Engineering Construction | Lotte Energy vs. Doosan Fuel Cell | Lotte Energy vs. Daishin Balance 1 | Lotte Energy vs. Total Soft Bank |
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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