Correlation Between Lake Materials and Lotte Chemical
Can any of the company-specific risk be diversified away by investing in both Lake 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 Lake 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 Lake Materials Co and Lotte Chemical Corp, you can compare the effects of market volatilities on Lake 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 Lake Materials with a short position of Lotte Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lake Materials and Lotte Chemical.
Diversification Opportunities for Lake Materials and Lotte Chemical
0.49 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Lake and Lotte is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Lake Materials Co 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 Lake 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 Lake Materials Co 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 Lake Materials i.e., Lake Materials and Lotte Chemical go up and down completely randomly.
Pair Corralation between Lake Materials and Lotte Chemical
Assuming the 90 days trading horizon Lake Materials Co is expected to generate 1.58 times more return on investment than Lotte Chemical. However, Lake Materials is 1.58 times more volatile than Lotte Chemical Corp. It trades about 0.01 of its potential returns per unit of risk. Lotte Chemical Corp is currently generating about -0.07 per unit of risk. If you would invest 1,607,000 in Lake Materials Co on August 29, 2024 and sell it today you would lose (338,000) from holding Lake Materials Co or give up 21.03% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lake Materials Co vs. Lotte Chemical Corp
Performance |
| Timeline |
| Lake Materials |
| Lotte Chemical Corp |
Lake Materials and Lotte Chemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lake Materials and Lotte Chemical
The main advantage of trading using opposite Lake Materials and Lotte Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lake 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.| Lake Materials vs. Samsung Electronics Co | Lake Materials vs. Samsung Electronics Co | Lake Materials vs. LG Energy Solution | Lake Materials vs. SK Hynix |
| Lotte Chemical vs. Dongil Technology | Lotte Chemical vs. KG Eco Technology | Lotte Chemical vs. NewFlex Technology Co | Lotte Chemical vs. Eagle Veterinary Technology |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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