Correlation Between Settlebank and Lotte Data
Can any of the company-specific risk be diversified away by investing in both Settlebank 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 Settlebank and Lotte Data into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Settlebank and Lotte Data Communication, you can compare the effects of market volatilities on Settlebank 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 Settlebank with a short position of Lotte Data. Check out your portfolio center. Please also check ongoing floating volatility patterns of Settlebank and Lotte Data.
Diversification Opportunities for Settlebank and Lotte Data
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Settlebank and Lotte is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Settlebank 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 Settlebank 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 Settlebank 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 Settlebank i.e., Settlebank and Lotte Data go up and down completely randomly.
Pair Corralation between Settlebank and Lotte Data
Assuming the 90 days trading horizon Settlebank is expected to generate 15.93 times less return on investment than Lotte Data. But when comparing it to its historical volatility, Settlebank is 1.03 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 0.2 of returns per unit of risk over similar time horizon. If you would invest 1,947,000 in Lotte Data Communication on October 13, 2024 and sell it today you would earn a total of 143,000 from holding Lotte Data Communication or generate 7.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Settlebank vs. Lotte Data Communication
Performance |
| Timeline |
| Settlebank |
| Lotte Data Communication |
Settlebank and Lotte Data Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Settlebank and Lotte Data
The main advantage of trading using opposite Settlebank and Lotte Data positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Settlebank 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.| Settlebank vs. Hwasung Industrial Co | Settlebank vs. Seoyon Topmetal Co | Settlebank vs. Hyunwoo Industrial Co | Settlebank vs. Dongil Metal Co |
| Lotte Data vs. Hansol Homedeco Co | Lotte Data vs. Daishin Information Communications | Lotte Data vs. Korea Alcohol Industrial | Lotte Data vs. Korea Information 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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