Correlation Between INNOX Advanced and Lotte Data
Can any of the company-specific risk be diversified away by investing in both INNOX Advanced 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 INNOX Advanced and Lotte Data into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between INNOX Advanced Materials and Lotte Data Communication, you can compare the effects of market volatilities on INNOX Advanced 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 INNOX Advanced with a short position of Lotte Data. Check out your portfolio center. Please also check ongoing floating volatility patterns of INNOX Advanced and Lotte Data.
Diversification Opportunities for INNOX Advanced and Lotte Data
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between INNOX and Lotte is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding INNOX Advanced Materials 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 INNOX Advanced 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 INNOX Advanced Materials 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 INNOX Advanced i.e., INNOX Advanced and Lotte Data go up and down completely randomly.
Pair Corralation between INNOX Advanced and Lotte Data
Assuming the 90 days trading horizon INNOX Advanced Materials is expected to under-perform the Lotte Data. But the stock apears to be less risky and, when comparing its historical volatility, INNOX Advanced Materials is 1.09 times less risky than Lotte Data. The stock trades about -0.01 of its potential returns per unit of risk. The Lotte Data Communication is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 2,167,283 in Lotte Data Communication on September 3, 2024 and sell it today you would lose (177,283) from holding Lotte Data Communication or give up 8.18% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
INNOX Advanced Materials vs. Lotte Data Communication
Performance |
| Timeline |
| INNOX Advanced Materials |
| Lotte Data Communication |
INNOX Advanced and Lotte Data Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with INNOX Advanced and Lotte Data
The main advantage of trading using opposite INNOX Advanced and Lotte Data positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if INNOX Advanced 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.| INNOX Advanced vs. SK Hynix | INNOX Advanced vs. LX Semicon Co | INNOX Advanced vs. Tokai Carbon Korea | INNOX Advanced vs. People Technology |
| Lotte Data vs. Seoul Food Industrial | Lotte Data vs. Hannong Chemicals | Lotte Data vs. Sung Bo Chemicals | Lotte Data vs. Samhwa Paint Industrial |
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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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