Correlation Between Lotte Data and Settlebank
Can any of the company-specific risk be diversified away by investing in both Lotte Data and Settlebank 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 Settlebank 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 Settlebank, you can compare the effects of market volatilities on Lotte Data and Settlebank 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 Settlebank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lotte Data and Settlebank.
Diversification Opportunities for Lotte Data and Settlebank
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Lotte and Settlebank is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Lotte Data Communication and Settlebank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Settlebank 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 Settlebank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Settlebank has no effect on the direction of Lotte Data i.e., Lotte Data and Settlebank go up and down completely randomly.
Pair Corralation between Lotte Data and Settlebank
Assuming the 90 days trading horizon Lotte Data Communication is expected to under-perform the Settlebank. But the stock apears to be less risky and, when comparing its historical volatility, Lotte Data Communication is 1.34 times less risky than Settlebank. The stock trades about -0.05 of its potential returns per unit of risk. The Settlebank is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest 1,600,000 in Settlebank on October 13, 2024 and sell it today you would lose (179,000) from holding Settlebank or give up 11.19% 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. Settlebank
Performance |
| Timeline |
| Lotte Data Communication |
| Settlebank |
Lotte Data and Settlebank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lotte Data and Settlebank
The main advantage of trading using opposite Lotte Data and Settlebank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lotte Data position performs unexpectedly, Settlebank 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 Settlebank will offset losses from the drop in Settlebank's long position.| Lotte Data vs. Hansol Homedeco Co | Lotte Data vs. Daishin Information Communications | Lotte Data vs. Korea Alcohol Industrial | Lotte Data vs. Korea Information Communications |
| Settlebank vs. Hwasung Industrial Co | Settlebank vs. Seoyon Topmetal Co | Settlebank vs. Hyunwoo Industrial Co | Settlebank vs. Dongil Metal 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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