Correlation Between TOPMATERIAL and Lotte Energy
Can any of the company-specific risk be diversified away by investing in both TOPMATERIAL and Lotte Energy 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 TOPMATERIAL and Lotte Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between TOPMATERIAL LTD and Lotte Energy Materials, you can compare the effects of market volatilities on TOPMATERIAL and Lotte Energy 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 TOPMATERIAL with a short position of Lotte Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of TOPMATERIAL and Lotte Energy.
Diversification Opportunities for TOPMATERIAL and Lotte Energy
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between TOPMATERIAL and Lotte is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding TOPMATERIAL LTD and Lotte Energy Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lotte Energy Materials and TOPMATERIAL 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 TOPMATERIAL LTD are associated (or correlated) with Lotte Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lotte Energy Materials has no effect on the direction of TOPMATERIAL i.e., TOPMATERIAL and Lotte Energy go up and down completely randomly.
Pair Corralation between TOPMATERIAL and Lotte Energy
Assuming the 90 days trading horizon TOPMATERIAL LTD is expected to generate 1.21 times more return on investment than Lotte Energy. However, TOPMATERIAL is 1.21 times more volatile than Lotte Energy Materials. It trades about -0.22 of its potential returns per unit of risk. Lotte Energy Materials is currently generating about -0.64 per unit of risk. If you would invest 3,470,000 in TOPMATERIAL LTD on September 2, 2024 and sell it today you would lose (580,000) from holding TOPMATERIAL LTD or give up 16.71% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
TOPMATERIAL LTD vs. Lotte Energy Materials
Performance |
| Timeline |
| TOPMATERIAL LTD |
| Lotte Energy Materials |
TOPMATERIAL and Lotte Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with TOPMATERIAL and Lotte Energy
The main advantage of trading using opposite TOPMATERIAL and Lotte Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TOPMATERIAL position performs unexpectedly, Lotte Energy 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 Lotte Energy will offset losses from the drop in Lotte Energy's long position.| TOPMATERIAL vs. Samsung Electronics Co | TOPMATERIAL vs. Samsung Electronics Co | TOPMATERIAL vs. LG Energy Solution | TOPMATERIAL vs. SK Hynix |
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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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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