Correlation Between Nable Communications and Lotte Energy
Can any of the company-specific risk be diversified away by investing in both Nable Communications and Lotte Energy 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 Nable Communications and Lotte Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nable Communications and Lotte Energy Materials, you can compare the effects of market volatilities on Nable Communications and Lotte Energy 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 Nable Communications with a short position of Lotte Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nable Communications and Lotte Energy.
Diversification Opportunities for Nable Communications and Lotte Energy
-0.66 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Nable and Lotte is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Nable Communications and Lotte Energy Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lotte Energy Materials and Nable Communications 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 Nable Communications are associated (or correlated) with Lotte Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lotte Energy Materials has no effect on the direction of Nable Communications i.e., Nable Communications and Lotte Energy go up and down completely randomly.
Pair Corralation between Nable Communications and Lotte Energy
Assuming the 90 days trading horizon Nable Communications is expected to generate 0.32 times more return on investment than Lotte Energy. However, Nable Communications is 3.15 times less risky than Lotte Energy. It trades about 0.14 of its potential returns per unit of risk. Lotte Energy Materials is currently generating about -0.06 per unit of risk. If you would invest 650,000 in Nable Communications on September 22, 2024 and sell it today you would earn a total of 29,000 from holding Nable Communications or generate 4.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nable Communications vs. Lotte Energy Materials
Performance |
| Timeline |
| Nable Communications |
| Lotte Energy Materials |
Nable Communications and Lotte Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nable Communications and Lotte Energy
The main advantage of trading using opposite Nable Communications and Lotte Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nable Communications position performs unexpectedly, Lotte Energy 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 Energy will offset losses from the drop in Lotte Energy's long position.| Nable Communications vs. Dongkuk Steel Mill | Nable Communications vs. MediaZen | Nable Communications vs. Bookook Steel | Nable Communications vs. Hanil Iron Steel |
| Lotte Energy vs. Moadata Co | Lotte Energy vs. Union Materials Corp | Lotte Energy vs. Lotte Data Communication | Lotte Energy vs. Nable Communications |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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