Correlation Between Lotte Chemical and Oriental Food
Can any of the company-specific risk be diversified away by investing in both Lotte Chemical and Oriental Food 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 Oriental Food 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 Oriental Food Industries, you can compare the effects of market volatilities on Lotte Chemical and Oriental Food 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 Oriental Food. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lotte Chemical and Oriental Food.
Diversification Opportunities for Lotte Chemical and Oriental Food
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Lotte and Oriental is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Lotte Chemical Titan and Oriental Food Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oriental Food Industries 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 Oriental Food. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oriental Food Industries has no effect on the direction of Lotte Chemical i.e., Lotte Chemical and Oriental Food go up and down completely randomly.
Pair Corralation between Lotte Chemical and Oriental Food
Assuming the 90 days trading horizon Lotte Chemical Titan is expected to under-perform the Oriental Food. In addition to that, Lotte Chemical is 1.14 times more volatile than Oriental Food Industries. It trades about -0.3 of its total potential returns per unit of risk. Oriental Food Industries is currently generating about -0.07 per unit of volatility. If you would invest 162.00 in Oriental Food Industries on November 5, 2024 and sell it today you would lose (4.00) from holding Oriental Food Industries or give up 2.47% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lotte Chemical Titan vs. Oriental Food Industries
Performance |
| Timeline |
| Lotte Chemical Titan |
| Oriental Food Industries |
Lotte Chemical and Oriental Food Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lotte Chemical and Oriental Food
The main advantage of trading using opposite Lotte Chemical and Oriental Food positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lotte Chemical position performs unexpectedly, Oriental Food 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 Oriental Food will offset losses from the drop in Oriental Food'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 |
| Oriental Food vs. Computer Forms Bhd | Oriental Food vs. Dataprep Holdings Bhd | Oriental Food vs. Uchi Technologies Bhd | Oriental Food vs. Awanbiru Technology Bhd |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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