Correlation Between Lotte Data and Geumhwa Plant
Can any of the company-specific risk be diversified away by investing in both Lotte Data and Geumhwa Plant 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 Geumhwa Plant 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 Geumhwa Plant Service, you can compare the effects of market volatilities on Lotte Data and Geumhwa Plant 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 Geumhwa Plant. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lotte Data and Geumhwa Plant.
Diversification Opportunities for Lotte Data and Geumhwa Plant
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Lotte and Geumhwa is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Lotte Data Communication and Geumhwa Plant Service in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Geumhwa Plant Service 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 Geumhwa Plant. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Geumhwa Plant Service has no effect on the direction of Lotte Data i.e., Lotte Data and Geumhwa Plant go up and down completely randomly.
Pair Corralation between Lotte Data and Geumhwa Plant
Assuming the 90 days trading horizon Lotte Data Communication is expected to under-perform the Geumhwa Plant. In addition to that, Lotte Data is 2.04 times more volatile than Geumhwa Plant Service. It trades about -0.23 of its total potential returns per unit of risk. Geumhwa Plant Service is currently generating about -0.28 per unit of volatility. If you would invest 2,750,000 in Geumhwa Plant Service on September 1, 2024 and sell it today you would lose (210,000) from holding Geumhwa Plant Service or give up 7.64% 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. Geumhwa Plant Service
Performance |
| Timeline |
| Lotte Data Communication |
| Geumhwa Plant Service |
Lotte Data and Geumhwa Plant Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lotte Data and Geumhwa Plant
The main advantage of trading using opposite Lotte Data and Geumhwa Plant positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lotte Data position performs unexpectedly, Geumhwa Plant 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 Geumhwa Plant will offset losses from the drop in Geumhwa Plant's long position.| Lotte Data vs. SK Holdings Co | Lotte Data vs. Busan Industrial Co | Lotte Data vs. Busan Ind | Lotte Data vs. Mirae Asset Daewoo |
| Geumhwa Plant vs. Korea New Network | Geumhwa Plant vs. ICD Co | Geumhwa Plant vs. DYPNF CoLtd | Geumhwa Plant vs. Busan Industrial Co |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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