Correlation Between Lotte Data and YG Entertainment
Can any of the company-specific risk be diversified away by investing in both Lotte Data and YG Entertainment 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 YG Entertainment 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 YG Entertainment, you can compare the effects of market volatilities on Lotte Data and YG Entertainment 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 YG Entertainment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lotte Data and YG Entertainment.
Diversification Opportunities for Lotte Data and YG Entertainment
-0.7 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Lotte and 122870 is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Lotte Data Communication and YG Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on YG Entertainment 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 YG Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of YG Entertainment has no effect on the direction of Lotte Data i.e., Lotte Data and YG Entertainment go up and down completely randomly.
Pair Corralation between Lotte Data and YG Entertainment
Assuming the 90 days trading horizon Lotte Data Communication is expected to under-perform the YG Entertainment. But the stock apears to be less risky and, when comparing its historical volatility, Lotte Data Communication is 1.02 times less risky than YG Entertainment. The stock trades about -0.03 of its potential returns per unit of risk. The YG Entertainment is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 4,760,000 in YG Entertainment on October 26, 2024 and sell it today you would earn a total of 150,000 from holding YG Entertainment or generate 3.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lotte Data Communication vs. YG Entertainment
Performance |
| Timeline |
| Lotte Data Communication |
| YG Entertainment |
Lotte Data and YG Entertainment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lotte Data and YG Entertainment
The main advantage of trading using opposite Lotte Data and YG Entertainment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lotte Data position performs unexpectedly, YG Entertainment 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 YG Entertainment will offset losses from the drop in YG Entertainment's long position.| Lotte Data vs. SK Holdings Co | Lotte Data vs. Busan Industrial Co | Lotte Data vs. Busan Ind | Lotte Data vs. RPBio Inc |
| YG Entertainment vs. Samsung Electronics Co | YG Entertainment vs. Samsung Electronics Co | YG Entertainment vs. LG Energy Solution | YG Entertainment vs. SK Hynix |
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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