Correlation Between Lake Materials and Woorim Machinery
Can any of the company-specific risk be diversified away by investing in both Lake Materials and Woorim Machinery 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 Woorim Machinery 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 Woorim Machinery Co, you can compare the effects of market volatilities on Lake Materials and Woorim Machinery 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 Woorim Machinery. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lake Materials and Woorim Machinery.
Diversification Opportunities for Lake Materials and Woorim Machinery
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Lake and Woorim is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Lake Materials Co and Woorim Machinery Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Woorim Machinery 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 Woorim Machinery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Woorim Machinery has no effect on the direction of Lake Materials i.e., Lake Materials and Woorim Machinery go up and down completely randomly.
Pair Corralation between Lake Materials and Woorim Machinery
Assuming the 90 days trading horizon Lake Materials Co is expected to under-perform the Woorim Machinery. In addition to that, Lake Materials is 1.15 times more volatile than Woorim Machinery Co. It trades about -0.19 of its total potential returns per unit of risk. Woorim Machinery Co is currently generating about -0.04 per unit of volatility. If you would invest 617,000 in Woorim Machinery Co on August 30, 2024 and sell it today you would lose (47,000) from holding Woorim Machinery Co or give up 7.62% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lake Materials Co vs. Woorim Machinery Co
Performance |
| Timeline |
| Lake Materials |
| Woorim Machinery |
Lake Materials and Woorim Machinery Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lake Materials and Woorim Machinery
The main advantage of trading using opposite Lake Materials and Woorim Machinery positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lake Materials position performs unexpectedly, Woorim Machinery 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 Woorim Machinery will offset losses from the drop in Woorim Machinery's long position.| Lake Materials vs. LG Electronics Pfd | Lake Materials vs. Sungmoon Electronics Co | Lake Materials vs. Shinsegae Information Communication | Lake Materials vs. Shinil Electronics Co |
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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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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