Correlation Between Jeju Air and Lotte Chilsung
Can any of the company-specific risk be diversified away by investing in both Jeju Air and Lotte Chilsung 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 Jeju Air and Lotte Chilsung into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Jeju Air Co and Lotte Chilsung Beverage, you can compare the effects of market volatilities on Jeju Air and Lotte Chilsung 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 Jeju Air with a short position of Lotte Chilsung. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jeju Air and Lotte Chilsung.
Diversification Opportunities for Jeju Air and Lotte Chilsung
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Jeju and Lotte is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Jeju Air Co and Lotte Chilsung Beverage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lotte Chilsung Beverage and Jeju Air 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 Jeju Air Co are associated (or correlated) with Lotte Chilsung. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lotte Chilsung Beverage has no effect on the direction of Jeju Air i.e., Jeju Air and Lotte Chilsung go up and down completely randomly.
Pair Corralation between Jeju Air and Lotte Chilsung
Assuming the 90 days trading horizon Jeju Air Co is expected to under-perform the Lotte Chilsung. In addition to that, Jeju Air is 1.75 times more volatile than Lotte Chilsung Beverage. It trades about -0.27 of its total potential returns per unit of risk. Lotte Chilsung Beverage is currently generating about -0.46 per unit of volatility. If you would invest 11,990,000 in Lotte Chilsung Beverage on October 18, 2024 and sell it today you would lose (1,520,000) from holding Lotte Chilsung Beverage or give up 12.68% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Jeju Air Co vs. Lotte Chilsung Beverage
Performance |
| Timeline |
| Jeju Air |
| Lotte Chilsung Beverage |
Jeju Air and Lotte Chilsung Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Jeju Air and Lotte Chilsung
The main advantage of trading using opposite Jeju Air and Lotte Chilsung positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Jeju Air position performs unexpectedly, Lotte Chilsung 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 Chilsung will offset losses from the drop in Lotte Chilsung's long position.| Jeju Air vs. Duksan Hi Metal | Jeju Air vs. Kbi Metal Co | Jeju Air vs. Industrial Bank | Jeju Air vs. DB Financial Investment |
| Lotte Chilsung vs. Jeju Air Co | Lotte Chilsung vs. CU Medical Systems | Lotte Chilsung vs. Youl Chon Chemical | Lotte Chilsung vs. Cloud Air CoLtd |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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