Correlation Between Derkwoo Electronics and Lotte Data
Can any of the company-specific risk be diversified away by investing in both Derkwoo Electronics 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 Derkwoo Electronics and Lotte Data into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Derkwoo Electronics Co and Lotte Data Communication, you can compare the effects of market volatilities on Derkwoo Electronics 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 Derkwoo Electronics with a short position of Lotte Data. Check out your portfolio center. Please also check ongoing floating volatility patterns of Derkwoo Electronics and Lotte Data.
Diversification Opportunities for Derkwoo Electronics and Lotte Data
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Derkwoo and Lotte is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Derkwoo Electronics Co 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 Derkwoo Electronics 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 Derkwoo Electronics Co 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 Derkwoo Electronics i.e., Derkwoo Electronics and Lotte Data go up and down completely randomly.
Pair Corralation between Derkwoo Electronics and Lotte Data
Assuming the 90 days trading horizon Derkwoo Electronics Co is expected to generate 0.9 times more return on investment than Lotte Data. However, Derkwoo Electronics Co is 1.11 times less risky than Lotte Data. It trades about -0.05 of its potential returns per unit of risk. Lotte Data Communication is currently generating about -0.19 per unit of risk. If you would invest 577,000 in Derkwoo Electronics Co on August 29, 2024 and sell it today you would lose (17,000) from holding Derkwoo Electronics Co or give up 2.95% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Derkwoo Electronics Co vs. Lotte Data Communication
Performance |
| Timeline |
| Derkwoo Electronics |
| Lotte Data Communication |
Derkwoo Electronics and Lotte Data Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Derkwoo Electronics and Lotte Data
The main advantage of trading using opposite Derkwoo Electronics and Lotte Data positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Derkwoo Electronics 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.| Derkwoo Electronics vs. Samsung Electronics Co | Derkwoo Electronics vs. Samsung Electronics Co | Derkwoo Electronics vs. LG Energy Solution | Derkwoo Electronics vs. SK Hynix |
| Lotte Data vs. SK Holdings Co | Lotte Data vs. Daou Tech | Lotte Data vs. KT Corporation | Lotte Data vs. Samsung Heavy Industries |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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