Correlation Between Lotte Chemical and Hengyuan Refining
Can any of the company-specific risk be diversified away by investing in both Lotte Chemical and Hengyuan Refining 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 Chemical and Hengyuan Refining into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lotte Chemical Titan and Hengyuan Refining, you can compare the effects of market volatilities on Lotte Chemical and Hengyuan Refining 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 Chemical with a short position of Hengyuan Refining. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lotte Chemical and Hengyuan Refining.
Diversification Opportunities for Lotte Chemical and Hengyuan Refining
0.36 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Lotte and Hengyuan is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Lotte Chemical Titan and Hengyuan Refining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hengyuan Refining and Lotte Chemical 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 Chemical Titan are associated (or correlated) with Hengyuan Refining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hengyuan Refining has no effect on the direction of Lotte Chemical i.e., Lotte Chemical and Hengyuan Refining go up and down completely randomly.
Pair Corralation between Lotte Chemical and Hengyuan Refining
Assuming the 90 days trading horizon Lotte Chemical Titan is expected to under-perform the Hengyuan Refining. But the stock apears to be less risky and, when comparing its historical volatility, Lotte Chemical Titan is 1.02 times less risky than Hengyuan Refining. The stock trades about -0.07 of its potential returns per unit of risk. The Hengyuan Refining is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest 308.00 in Hengyuan Refining on September 2, 2024 and sell it today you would lose (105.00) from holding Hengyuan Refining or give up 34.09% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lotte Chemical Titan vs. Hengyuan Refining
Performance |
| Timeline |
| Lotte Chemical Titan |
| Hengyuan Refining |
Lotte Chemical and Hengyuan Refining Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lotte Chemical and Hengyuan Refining
The main advantage of trading using opposite Lotte Chemical and Hengyuan Refining positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lotte Chemical position performs unexpectedly, Hengyuan Refining 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 Hengyuan Refining will offset losses from the drop in Hengyuan Refining's long position.| Lotte Chemical vs. MI Technovation Bhd | Lotte Chemical vs. PMB Technology Bhd | Lotte Chemical vs. Magni Tech Industries | Lotte Chemical vs. Aurelius Technologies Bhd |
| Hengyuan Refining vs. Senheng New Retail | Hengyuan Refining vs. Binasat Communications Bhd | Hengyuan Refining vs. Farm Price Holdings | Hengyuan Refining vs. SSF Home Group |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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