Correlation Between Lotte Data and Hyundai Engineering
Can any of the company-specific risk be diversified away by investing in both Lotte Data and Hyundai Engineering 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 Lotte Data and Hyundai Engineering into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lotte Data Communication and Hyundai Engineering Construction, you can compare the effects of market volatilities on Lotte Data and Hyundai Engineering 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 Lotte Data with a short position of Hyundai Engineering. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lotte Data and Hyundai Engineering.
Diversification Opportunities for Lotte Data and Hyundai Engineering
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Lotte and Hyundai is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Lotte Data Communication and Hyundai Engineering Constructi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hyundai Engineering and Lotte Data 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 Lotte Data Communication are associated (or correlated) with Hyundai Engineering. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hyundai Engineering has no effect on the direction of Lotte Data i.e., Lotte Data and Hyundai Engineering go up and down completely randomly.
Pair Corralation between Lotte Data and Hyundai Engineering
Assuming the 90 days trading horizon Lotte Data Communication is expected to generate 1.78 times more return on investment than Hyundai Engineering. However, Lotte Data is 1.78 times more volatile than Hyundai Engineering Construction. It trades about 0.0 of its potential returns per unit of risk. Hyundai Engineering Construction is currently generating about -0.03 per unit of risk. If you would invest 2,555,154 in Lotte Data Communication on October 14, 2024 and sell it today you would lose (465,154) from holding Lotte Data Communication or give up 18.2% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lotte Data Communication vs. Hyundai Engineering Constructi
Performance |
| Timeline |
| Lotte Data Communication |
| Hyundai Engineering |
Lotte Data and Hyundai Engineering Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lotte Data and Hyundai Engineering
The main advantage of trading using opposite Lotte Data and Hyundai Engineering positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lotte Data position performs unexpectedly, Hyundai Engineering 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 Hyundai Engineering will offset losses from the drop in Hyundai Engineering's long position.| Lotte Data vs. YG Entertainment | Lotte Data vs. Korea Information Communications | Lotte Data vs. SKONEC Entertainment Co | Lotte Data vs. Barunson Entertainment Arts |
| Hyundai Engineering vs. Kakao Games Corp | Hyundai Engineering vs. Dong A Steel Technology | Hyundai Engineering vs. DB Insurance Co | Hyundai Engineering vs. Lotte Data Communication |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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