Correlation Between Lotte Chemical and Hoffmen Cleanindo
Can any of the company-specific risk be diversified away by investing in both Lotte Chemical and Hoffmen Cleanindo 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 Hoffmen Cleanindo 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 Hoffmen Cleanindo, you can compare the effects of market volatilities on Lotte Chemical and Hoffmen Cleanindo 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 Hoffmen Cleanindo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lotte Chemical and Hoffmen Cleanindo.
Diversification Opportunities for Lotte Chemical and Hoffmen Cleanindo
0.25 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Lotte and Hoffmen is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Lotte Chemical Titan and Hoffmen Cleanindo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hoffmen Cleanindo 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 Hoffmen Cleanindo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hoffmen Cleanindo has no effect on the direction of Lotte Chemical i.e., Lotte Chemical and Hoffmen Cleanindo go up and down completely randomly.
Pair Corralation between Lotte Chemical and Hoffmen Cleanindo
Assuming the 90 days trading horizon Lotte Chemical is expected to generate 5.79 times less return on investment than Hoffmen Cleanindo. But when comparing it to its historical volatility, Lotte Chemical Titan is 1.21 times less risky than Hoffmen Cleanindo. It trades about 0.01 of its potential returns per unit of risk. Hoffmen Cleanindo is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 16,100 in Hoffmen Cleanindo on August 30, 2024 and sell it today you would earn a total of 400.00 from holding Hoffmen Cleanindo or generate 2.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lotte Chemical Titan vs. Hoffmen Cleanindo
Performance |
| Timeline |
| Lotte Chemical Titan |
| Hoffmen Cleanindo |
Lotte Chemical and Hoffmen Cleanindo Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lotte Chemical and Hoffmen Cleanindo
The main advantage of trading using opposite Lotte Chemical and Hoffmen Cleanindo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lotte Chemical position performs unexpectedly, Hoffmen Cleanindo 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 Hoffmen Cleanindo will offset losses from the drop in Hoffmen Cleanindo's long position.| Lotte Chemical vs. Champion Pacific Indonesia | Lotte Chemical vs. Argha Karya Prima | Lotte Chemical vs. Asiaplast Industries Tbk | Lotte Chemical vs. Intanwijaya Internasional Tbk |
| Hoffmen Cleanindo vs. Surya Citra Media | Hoffmen Cleanindo vs. Indointernet Tbk PT | Hoffmen Cleanindo vs. Grand Kartech Tbk | Hoffmen Cleanindo vs. Ciptadana Asset Management |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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