Correlation Between Hana Materials and Lotte Chemical
Can any of the company-specific risk be diversified away by investing in both Hana Materials and Lotte Chemical 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 Hana Materials and Lotte Chemical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hana Materials and Lotte Chemical Corp, you can compare the effects of market volatilities on Hana Materials and Lotte Chemical 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 Hana Materials with a short position of Lotte Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hana Materials and Lotte Chemical.
Diversification Opportunities for Hana Materials and Lotte Chemical
0.25 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Hana and Lotte is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Hana Materials and Lotte Chemical Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lotte Chemical Corp and Hana Materials 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 Hana Materials are associated (or correlated) with Lotte Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lotte Chemical Corp has no effect on the direction of Hana Materials i.e., Hana Materials and Lotte Chemical go up and down completely randomly.
Pair Corralation between Hana Materials and Lotte Chemical
Assuming the 90 days trading horizon Hana Materials is expected to generate 0.56 times more return on investment than Lotte Chemical. However, Hana Materials is 1.79 times less risky than Lotte Chemical. It trades about -0.32 of its potential returns per unit of risk. Lotte Chemical Corp is currently generating about -0.28 per unit of risk. If you would invest 2,905,000 in Hana Materials on August 25, 2024 and sell it today you would lose (520,000) from holding Hana Materials or give up 17.9% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hana Materials vs. Lotte Chemical Corp
Performance |
| Timeline |
| Hana Materials |
| Lotte Chemical Corp |
Hana Materials and Lotte Chemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hana Materials and Lotte Chemical
The main advantage of trading using opposite Hana Materials and Lotte Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hana Materials position performs unexpectedly, Lotte Chemical 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 Chemical will offset losses from the drop in Lotte Chemical's long position.| Hana Materials vs. PJ Metal Co | Hana Materials vs. Dongil Metal Co | Hana Materials vs. Dongwon Metal Co | Hana Materials vs. Daou Technology |
| Lotte Chemical vs. Lake Materials Co | Lotte Chemical vs. LB Investment | Lotte Chemical vs. SBI Investment KOREA | Lotte Chemical vs. Hana Materials |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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