Correlation Between Diamond Food and Lotte Chemical
Can any of the company-specific risk be diversified away by investing in both Diamond Food 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 Diamond Food and Lotte Chemical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Diamond Food Indonesia and Lotte Chemical Titan, you can compare the effects of market volatilities on Diamond Food 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 Diamond Food with a short position of Lotte Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Diamond Food and Lotte Chemical.
Diversification Opportunities for Diamond Food and Lotte Chemical
0.1 | Correlation Coefficient |
Average diversification
The 3 months correlation between Diamond and Lotte is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Diamond Food Indonesia 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 Diamond Food 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 Diamond Food Indonesia 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 Diamond Food i.e., Diamond Food and Lotte Chemical go up and down completely randomly.
Pair Corralation between Diamond Food and Lotte Chemical
Assuming the 90 days trading horizon Diamond Food Indonesia is expected to generate 1.04 times more return on investment than Lotte Chemical. However, Diamond Food is 1.04 times more volatile than Lotte Chemical Titan. It trades about -0.08 of its potential returns per unit of risk. Lotte Chemical Titan is currently generating about -0.31 per unit of risk. If you would invest 79,000 in Diamond Food Indonesia on September 3, 2024 and sell it today you would lose (1,500) from holding Diamond Food Indonesia or give up 1.9% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Diamond Food Indonesia vs. Lotte Chemical Titan
Performance |
| Timeline |
| Diamond Food Indonesia |
| Lotte Chemical Titan |
Diamond Food and Lotte Chemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Diamond Food and Lotte Chemical
The main advantage of trading using opposite Diamond Food and Lotte Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Diamond Food 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.| Diamond Food vs. Garudafood Putra Putri | Diamond Food vs. PT Wahana Interfood | Diamond Food vs. Mitra Pinasthika Mustika | Diamond Food vs. Jakarta Int Hotels |
| Lotte Chemical vs. Timah Persero Tbk | Lotte Chemical vs. Semen Indonesia Persero | Lotte Chemical vs. Mitra Pinasthika Mustika | Lotte Chemical vs. Jakarta Int Hotels |
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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
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