Correlation Between Daejung Chemicals and Lotte Data
Can any of the company-specific risk be diversified away by investing in both Daejung Chemicals and Lotte Data 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 Daejung Chemicals and Lotte Data into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Daejung Chemicals Metals and Lotte Data Communication, you can compare the effects of market volatilities on Daejung Chemicals and Lotte Data 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 Daejung Chemicals with a short position of Lotte Data. Check out your portfolio center. Please also check ongoing floating volatility patterns of Daejung Chemicals and Lotte Data.
Diversification Opportunities for Daejung Chemicals and Lotte Data
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Daejung and Lotte is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Daejung Chemicals Metals and Lotte Data Communication in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lotte Data Communication and Daejung Chemicals 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 Daejung Chemicals Metals are associated (or correlated) with Lotte Data. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lotte Data Communication has no effect on the direction of Daejung Chemicals i.e., Daejung Chemicals and Lotte Data go up and down completely randomly.
Pair Corralation between Daejung Chemicals and Lotte Data
Assuming the 90 days trading horizon Daejung Chemicals Metals is expected to generate about the same return on investment as Lotte Data Communication. But, Daejung Chemicals Metals is 1.55 times less risky than Lotte Data. It trades about -0.01 of its potential returns per unit of risk. Lotte Data Communication is currently generating about -0.01 per unit of risk. If you would invest 2,781,187 in Lotte Data Communication on November 7, 2024 and sell it today you would lose (815,187) from holding Lotte Data Communication or give up 29.31% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Daejung Chemicals Metals vs. Lotte Data Communication
Performance |
| Timeline |
| Daejung Chemicals Metals |
| Lotte Data Communication |
Daejung Chemicals and Lotte Data Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Daejung Chemicals and Lotte Data
The main advantage of trading using opposite Daejung Chemicals and Lotte Data positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Daejung Chemicals position performs unexpectedly, Lotte Data 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 Data will offset losses from the drop in Lotte Data's long position.| Daejung Chemicals vs. Kukdong Oil Chemicals | Daejung Chemicals vs. SH Energy Chemical | Daejung Chemicals vs. Samsung Life Insurance | Daejung Chemicals vs. Kyung In Synthetic Corp |
| Lotte Data vs. HB Technology TD | Lotte Data vs. Daou Technology | Lotte Data vs. Korea Shipbuilding Offshore | Lotte Data vs. AeroSpace Technology of |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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