Correlation Between Lotte Chemical and Ashmore Asset

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Can any of the company-specific risk be diversified away by investing in both Lotte Chemical and Ashmore Asset 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 Ashmore Asset 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 Ashmore Asset Management, you can compare the effects of market volatilities on Lotte Chemical and Ashmore Asset 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 Ashmore Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lotte Chemical and Ashmore Asset.

Diversification Opportunities for Lotte Chemical and Ashmore Asset

0.73
  Correlation Coefficient

Poor diversification

The 3 months correlation between Lotte and Ashmore is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Lotte Chemical Titan and Ashmore Asset Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ashmore Asset Management 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 Ashmore Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ashmore Asset Management has no effect on the direction of Lotte Chemical i.e., Lotte Chemical and Ashmore Asset go up and down completely randomly.

Pair Corralation between Lotte Chemical and Ashmore Asset

Assuming the 90 days trading horizon Lotte Chemical Titan is expected to generate 0.49 times more return on investment than Ashmore Asset. However, Lotte Chemical Titan is 2.02 times less risky than Ashmore Asset. It trades about 0.01 of its potential returns per unit of risk. Ashmore Asset Management is currently generating about -0.03 per unit of risk. If you would invest  19,300  in Lotte Chemical Titan on August 30, 2024 and sell it today you would earn a total of  0.00  from holding Lotte Chemical Titan or generate 0.0% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Lotte Chemical Titan  vs.  Ashmore Asset Management

 Performance 
       Timeline  
Lotte Chemical Titan 

Risk-Adjusted Performance

5 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Lotte Chemical Titan are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Lotte Chemical may actually be approaching a critical reversion point that can send shares even higher in December 2024.
Ashmore Asset Management 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Ashmore Asset Management are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Ashmore Asset disclosed solid returns over the last few months and may actually be approaching a breakup point.

Lotte Chemical and Ashmore Asset Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Lotte Chemical and Ashmore Asset

The main advantage of trading using opposite Lotte Chemical and Ashmore Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lotte Chemical position performs unexpectedly, Ashmore Asset 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 Ashmore Asset will offset losses from the drop in Ashmore Asset's long position.
The idea behind Lotte Chemical Titan and Ashmore Asset Management pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.

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