Correlation Between Daehan Steel and Lotte Chemical
Can any of the company-specific risk be diversified away by investing in both Daehan Steel 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 Daehan Steel and Lotte Chemical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Daehan Steel and Lotte Chemical Corp, you can compare the effects of market volatilities on Daehan Steel 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 Daehan Steel with a short position of Lotte Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Daehan Steel and Lotte Chemical.
Diversification Opportunities for Daehan Steel and Lotte Chemical
-0.32 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Daehan and Lotte is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Daehan Steel 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 Daehan Steel 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 Daehan Steel 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 Daehan Steel i.e., Daehan Steel and Lotte Chemical go up and down completely randomly.
Pair Corralation between Daehan Steel and Lotte Chemical
Assuming the 90 days trading horizon Daehan Steel is expected to generate 0.56 times more return on investment than Lotte Chemical. However, Daehan Steel is 1.78 times less risky than Lotte Chemical. It trades about 0.27 of its potential returns per unit of risk. Lotte Chemical Corp is currently generating about -0.34 per unit of risk. If you would invest 1,333,000 in Daehan Steel on September 1, 2024 and sell it today you would earn a total of 218,000 from holding Daehan Steel or generate 16.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Daehan Steel vs. Lotte Chemical Corp
Performance |
| Timeline |
| Daehan Steel |
| Lotte Chemical Corp |
Daehan Steel and Lotte Chemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Daehan Steel and Lotte Chemical
The main advantage of trading using opposite Daehan Steel and Lotte Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Daehan Steel 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.| Daehan Steel vs. Nice Information Telecommunication | Daehan Steel vs. Wireless Power Amplifier | Daehan Steel vs. Nable Communications | Daehan Steel vs. CG Hi Tech |
| Lotte Chemical vs. LG Chemicals | Lotte Chemical vs. POSCO Holdings | Lotte Chemical vs. Hanwha Solutions | Lotte Chemical vs. Hyundai Steel |
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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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