Correlation Between Lotte Chemical and CPE Technology
Can any of the company-specific risk be diversified away by investing in both Lotte Chemical and CPE Technology 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 CPE Technology 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 CPE Technology Berhad, you can compare the effects of market volatilities on Lotte Chemical and CPE Technology 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 CPE Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lotte Chemical and CPE Technology.
Diversification Opportunities for Lotte Chemical and CPE Technology
-0.77 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Lotte and CPE is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Lotte Chemical Titan and CPE Technology Berhad in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CPE Technology Berhad 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 CPE Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CPE Technology Berhad has no effect on the direction of Lotte Chemical i.e., Lotte Chemical and CPE Technology go up and down completely randomly.
Pair Corralation between Lotte Chemical and CPE Technology
Assuming the 90 days trading horizon Lotte Chemical Titan is expected to under-perform the CPE Technology. In addition to that, Lotte Chemical is 1.03 times more volatile than CPE Technology Berhad. It trades about -0.3 of its total potential returns per unit of risk. CPE Technology Berhad is currently generating about 0.04 per unit of volatility. If you would invest 94.00 in CPE Technology Berhad on November 5, 2024 and sell it today you would earn a total of 1.00 from holding CPE Technology Berhad or generate 1.06% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Lotte Chemical Titan vs. CPE Technology Berhad
Performance |
Timeline |
Lotte Chemical Titan |
CPE Technology Berhad |
Lotte Chemical and CPE Technology Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Lotte Chemical and CPE Technology
The main advantage of trading using opposite Lotte Chemical and CPE Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lotte Chemical position performs unexpectedly, CPE Technology 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 CPE Technology will offset losses from the drop in CPE Technology's long position.Lotte Chemical vs. Petronas Chemicals Group | Lotte Chemical vs. Techbond Group Bhd | Lotte Chemical vs. Digistar Bhd | Lotte Chemical vs. Tambun Indah Land |
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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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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