Correlation Between Korea Investment and Lotte Energy
Can any of the company-specific risk be diversified away by investing in both Korea Investment 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 Korea Investment and Lotte Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Korea Investment Holdings and Lotte Energy Materials, you can compare the effects of market volatilities on Korea Investment 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 Korea Investment with a short position of Lotte Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Korea Investment and Lotte Energy.
Diversification Opportunities for Korea Investment and Lotte Energy
-0.62 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Korea and Lotte is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Korea Investment Holdings 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 Korea Investment 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 Investment Holdings 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 Korea Investment i.e., Korea Investment and Lotte Energy go up and down completely randomly.
Pair Corralation between Korea Investment and Lotte Energy
Assuming the 90 days trading horizon Korea Investment Holdings is expected to generate 0.35 times more return on investment than Lotte Energy. However, Korea Investment Holdings is 2.83 times less risky than Lotte Energy. It trades about -0.02 of its potential returns per unit of risk. Lotte Energy Materials is currently generating about -0.64 per unit of risk. If you would invest 5,320,000 in Korea Investment Holdings on August 28, 2024 and sell it today you would lose (20,000) from holding Korea Investment Holdings or give up 0.38% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Korea Investment Holdings vs. Lotte Energy Materials
Performance |
| Timeline |
| Korea Investment Holdings |
| Lotte Energy Materials |
Korea Investment and Lotte Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Korea Investment and Lotte Energy
The main advantage of trading using opposite Korea Investment and Lotte Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Korea Investment 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.| Korea Investment vs. Samji Electronics Co | Korea Investment vs. Sunny Electronics Corp | Korea Investment vs. Genie Music | Korea Investment vs. Alton Sports CoLtd |
| Lotte Energy vs. Korea Real Estate | Lotte Energy vs. Korea Ratings Co | Lotte Energy vs. IQuest Co | Lotte Energy vs. Wonbang Tech Co |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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