Correlation Between Lotte Rental and Jeju Beer
Can any of the company-specific risk be diversified away by investing in both Lotte Rental and Jeju Beer 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 Jeju Beer 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 Jeju Beer Co, you can compare the effects of market volatilities on Lotte Rental and Jeju Beer 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 Jeju Beer. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lotte Rental and Jeju Beer.
Diversification Opportunities for Lotte Rental and Jeju Beer
0.27 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Lotte and Jeju is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Lotte Rental Co and Jeju Beer Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jeju Beer 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 Jeju Beer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jeju Beer has no effect on the direction of Lotte Rental i.e., Lotte Rental and Jeju Beer go up and down completely randomly.
Pair Corralation between Lotte Rental and Jeju Beer
Assuming the 90 days trading horizon Lotte Rental Co is expected to under-perform the Jeju Beer. But the stock apears to be less risky and, when comparing its historical volatility, Lotte Rental Co is 1.86 times less risky than Jeju Beer. The stock trades about -0.02 of its potential returns per unit of risk. The Jeju Beer Co is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 243,500 in Jeju Beer Co on October 24, 2024 and sell it today you would earn a total of 12,000 from holding Jeju Beer Co or generate 4.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lotte Rental Co vs. Jeju Beer Co
Performance |
| Timeline |
| Lotte Rental |
| Jeju Beer |
Lotte Rental and Jeju Beer Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lotte Rental and Jeju Beer
The main advantage of trading using opposite Lotte Rental and Jeju Beer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lotte Rental position performs unexpectedly, Jeju Beer 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 Jeju Beer will offset losses from the drop in Jeju Beer's long position.| Lotte Rental vs. Samsung Electronics Co | Lotte Rental vs. Samsung Electronics Co | Lotte Rental vs. LG Energy Solution | Lotte Rental vs. SK Hynix |
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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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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