Correlation Between Lotte Rental and Korea Industrial
Can any of the company-specific risk be diversified away by investing in both Lotte Rental and Korea Industrial 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 Lotte Rental and Korea Industrial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lotte Rental Co and Korea Industrial Co, you can compare the effects of market volatilities on Lotte Rental and Korea Industrial 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 Lotte Rental with a short position of Korea Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lotte Rental and Korea Industrial.
Diversification Opportunities for Lotte Rental and Korea Industrial
-0.2 | Correlation Coefficient |
Good diversification
The 3 months correlation between Lotte and Korea is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Lotte Rental Co and Korea Industrial Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Korea Industrial and Lotte Rental 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 Lotte Rental Co are associated (or correlated) with Korea Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Korea Industrial has no effect on the direction of Lotte Rental i.e., Lotte Rental and Korea Industrial go up and down completely randomly.
Pair Corralation between Lotte Rental and Korea Industrial
Assuming the 90 days trading horizon Lotte Rental Co is expected to under-perform the Korea Industrial. But the stock apears to be less risky and, when comparing its historical volatility, Lotte Rental Co is 1.51 times less risky than Korea Industrial. The stock trades about -0.2 of its potential returns per unit of risk. The Korea Industrial Co is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest 271,500 in Korea Industrial Co on November 8, 2024 and sell it today you would earn a total of 24,500 from holding Korea Industrial Co or generate 9.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lotte Rental Co vs. Korea Industrial Co
Performance |
| Timeline |
| Lotte Rental |
| Korea Industrial |
Lotte Rental and Korea Industrial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lotte Rental and Korea Industrial
The main advantage of trading using opposite Lotte Rental and Korea Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lotte Rental position performs unexpectedly, Korea Industrial 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 Korea Industrial will offset losses from the drop in Korea Industrial's long position.| Lotte Rental vs. KyungIn Electronics Co | Lotte Rental vs. Samji Electronics Co | Lotte Rental vs. GS Retail Co | Lotte Rental vs. Vissem Electronics Co |
| Korea Industrial vs. Echomarketing CoLtd | Korea Industrial vs. Chorokbaem Healthcare Co | Korea Industrial vs. Dongbang Transport Logistics | Korea Industrial vs. Mobileleader 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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