Correlation Between Hong Leong and Lotte Chemical
Can any of the company-specific risk be diversified away by investing in both Hong Leong and Lotte Chemical 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 Hong Leong and Lotte Chemical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hong Leong Bank and Lotte Chemical Titan, you can compare the effects of market volatilities on Hong Leong and Lotte Chemical 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 Hong Leong with a short position of Lotte Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hong Leong and Lotte Chemical.
Diversification Opportunities for Hong Leong and Lotte Chemical
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Hong and Lotte is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Hong Leong Bank and Lotte Chemical Titan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lotte Chemical Titan and Hong Leong 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 Hong Leong Bank are associated (or correlated) with Lotte Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lotte Chemical Titan has no effect on the direction of Hong Leong i.e., Hong Leong and Lotte Chemical go up and down completely randomly.
Pair Corralation between Hong Leong and Lotte Chemical
Assuming the 90 days trading horizon Hong Leong Bank is expected to generate 0.2 times more return on investment than Lotte Chemical. However, Hong Leong Bank is 4.96 times less risky than Lotte Chemical. It trades about -0.12 of its potential returns per unit of risk. Lotte Chemical Titan is currently generating about -0.06 per unit of risk. If you would invest 2,044 in Hong Leong Bank on October 16, 2024 and sell it today you would lose (34.00) from holding Hong Leong Bank or give up 1.66% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hong Leong Bank vs. Lotte Chemical Titan
Performance |
| Timeline |
| Hong Leong Bank |
| Lotte Chemical Titan |
Hong Leong and Lotte Chemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hong Leong and Lotte Chemical
The main advantage of trading using opposite Hong Leong and Lotte Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hong Leong position performs unexpectedly, Lotte Chemical 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 Chemical will offset losses from the drop in Lotte Chemical's long position.| Hong Leong vs. Systech Bhd | Hong Leong vs. Binasat Communications Bhd | Hong Leong vs. IHH Healthcare Bhd | Hong Leong vs. Tex Cycle Technology |
| Lotte Chemical vs. Petronas Chemicals Group | Lotte Chemical vs. Ancom Berhad | Lotte Chemical vs. Techbond Group 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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