Correlation Between Lotte Data and KEPCO Engineering
Can any of the company-specific risk be diversified away by investing in both Lotte Data and KEPCO 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 KEPCO 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 KEPCO Engineering Construction, you can compare the effects of market volatilities on Lotte Data and KEPCO 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 KEPCO Engineering. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lotte Data and KEPCO Engineering.
Diversification Opportunities for Lotte Data and KEPCO Engineering
0.53 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Lotte and KEPCO is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Lotte Data Communication and KEPCO Engineering Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KEPCO 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 KEPCO Engineering. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KEPCO Engineering has no effect on the direction of Lotte Data i.e., Lotte Data and KEPCO Engineering go up and down completely randomly.
Pair Corralation between Lotte Data and KEPCO Engineering
Assuming the 90 days trading horizon Lotte Data Communication is expected to under-perform the KEPCO Engineering. In addition to that, Lotte Data is 1.07 times more volatile than KEPCO Engineering Construction. It trades about -0.01 of its total potential returns per unit of risk. KEPCO Engineering Construction is currently generating about 0.49 per unit of volatility. If you would invest 5,680,000 in KEPCO Engineering Construction on October 24, 2024 and sell it today you would earn a total of 1,020,000 from holding KEPCO Engineering Construction or generate 17.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lotte Data Communication vs. KEPCO Engineering Construction
Performance |
| Timeline |
| Lotte Data Communication |
| KEPCO Engineering |
Lotte Data and KEPCO Engineering Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lotte Data and KEPCO Engineering
The main advantage of trading using opposite Lotte Data and KEPCO Engineering positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lotte Data position performs unexpectedly, KEPCO 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 KEPCO Engineering will offset losses from the drop in KEPCO Engineering's long position.| Lotte Data vs. National Plastic Co | Lotte Data vs. Phoenix Materials Co | Lotte Data vs. SCI Information Service | Lotte Data vs. Jeong Moon Information |
| KEPCO Engineering vs. Phoenix Materials Co | KEPCO Engineering vs. Barunson Entertainment Arts | KEPCO Engineering vs. MEDIANA CoLtd | KEPCO Engineering vs. YG Entertainment |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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