Correlation Between Lotte Data and Kumho Petro
Can any of the company-specific risk be diversified away by investing in both Lotte Data and Kumho Petro 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 Kumho Petro 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 Kumho Petro Chemical, you can compare the effects of market volatilities on Lotte Data and Kumho Petro 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 Kumho Petro. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lotte Data and Kumho Petro.
Diversification Opportunities for Lotte Data and Kumho Petro
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Lotte and Kumho is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Lotte Data Communication and Kumho Petro Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kumho Petro Chemical 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 Kumho Petro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kumho Petro Chemical has no effect on the direction of Lotte Data i.e., Lotte Data and Kumho Petro go up and down completely randomly.
Pair Corralation between Lotte Data and Kumho Petro
Assuming the 90 days trading horizon Lotte Data Communication is expected to generate 0.96 times more return on investment than Kumho Petro. However, Lotte Data Communication is 1.04 times less risky than Kumho Petro. It trades about -0.05 of its potential returns per unit of risk. Kumho Petro Chemical is currently generating about -0.09 per unit of risk. If you would invest 2,745,000 in Lotte Data Communication on October 17, 2024 and sell it today you would lose (705,000) from holding Lotte Data Communication or give up 25.68% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lotte Data Communication vs. Kumho Petro Chemical
Performance |
| Timeline |
| Lotte Data Communication |
| Kumho Petro Chemical |
Lotte Data and Kumho Petro Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lotte Data and Kumho Petro
The main advantage of trading using opposite Lotte Data and Kumho Petro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lotte Data position performs unexpectedly, Kumho Petro 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 Kumho Petro will offset losses from the drop in Kumho Petro's long position.| Lotte Data vs. FoodNamoo | Lotte Data vs. Daejung Chemicals Metals | Lotte Data vs. Dongil Metal Co | Lotte Data vs. Hanjoo Light Metal |
| Kumho Petro vs. System and Application | Kumho Petro vs. KakaoBank Corp | Kumho Petro vs. Settlebank | Kumho Petro 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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