Correlation Between BHI and Lotte Chemical
Can any of the company-specific risk be diversified away by investing in both BHI and Lotte Chemical 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 BHI and Lotte Chemical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BHI Co and Lotte Chemical Corp, you can compare the effects of market volatilities on BHI and Lotte Chemical 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 BHI with a short position of Lotte Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of BHI and Lotte Chemical.
Diversification Opportunities for BHI and Lotte Chemical
0.16 | Correlation Coefficient |
Average diversification
The 3 months correlation between BHI and Lotte is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding BHI Co and Lotte Chemical Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lotte Chemical Corp and BHI 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 BHI Co are associated (or correlated) with Lotte Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lotte Chemical Corp has no effect on the direction of BHI i.e., BHI and Lotte Chemical go up and down completely randomly.
Pair Corralation between BHI and Lotte Chemical
Assuming the 90 days trading horizon BHI Co is expected to generate 1.53 times more return on investment than Lotte Chemical. However, BHI is 1.53 times more volatile than Lotte Chemical Corp. It trades about 0.08 of its potential returns per unit of risk. Lotte Chemical Corp is currently generating about -0.07 per unit of risk. If you would invest 640,000 in BHI Co on November 2, 2024 and sell it today you would earn a total of 1,710,000 from holding BHI Co or generate 267.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BHI Co vs. Lotte Chemical Corp
Performance |
| Timeline |
| BHI Co |
| Lotte Chemical Corp |
BHI and Lotte Chemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BHI and Lotte Chemical
The main advantage of trading using opposite BHI and Lotte Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BHI position performs unexpectedly, Lotte Chemical 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 Chemical will offset losses from the drop in Lotte Chemical's long position.| BHI vs. Korean Reinsurance Co | BHI vs. Korea Industrial Co | BHI vs. Hyunwoo Industrial Co | BHI vs. Lotte Non Life Insurance |
| Lotte Chemical vs. GS Retail Co | Lotte Chemical vs. Tway Air Co | Lotte Chemical vs. Dongil Metal Co | Lotte Chemical vs. Korean Air Lines |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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