Correlation Between Lotte Chemical and Perusahaan Gas
Can any of the company-specific risk be diversified away by investing in both Lotte Chemical and Perusahaan Gas 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 Perusahaan Gas 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 Perusahaan Gas Negara, you can compare the effects of market volatilities on Lotte Chemical and Perusahaan Gas 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 Perusahaan Gas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lotte Chemical and Perusahaan Gas.
Diversification Opportunities for Lotte Chemical and Perusahaan Gas
-0.07 | Correlation Coefficient |
Good diversification
The 3 months correlation between Lotte and Perusahaan is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Lotte Chemical Titan and Perusahaan Gas Negara in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Perusahaan Gas Negara 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 Perusahaan Gas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Perusahaan Gas Negara has no effect on the direction of Lotte Chemical i.e., Lotte Chemical and Perusahaan Gas go up and down completely randomly.
Pair Corralation between Lotte Chemical and Perusahaan Gas
Assuming the 90 days trading horizon Lotte Chemical Titan is expected to generate 1.6 times more return on investment than Perusahaan Gas. However, Lotte Chemical is 1.6 times more volatile than Perusahaan Gas Negara. It trades about 0.05 of its potential returns per unit of risk. Perusahaan Gas Negara is currently generating about 0.03 per unit of risk. If you would invest 16,800 in Lotte Chemical Titan on September 2, 2024 and sell it today you would earn a total of 2,000 from holding Lotte Chemical Titan or generate 11.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lotte Chemical Titan vs. Perusahaan Gas Negara
Performance |
| Timeline |
| Lotte Chemical Titan |
| Perusahaan Gas Negara |
Lotte Chemical and Perusahaan Gas Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lotte Chemical and Perusahaan Gas
The main advantage of trading using opposite Lotte Chemical and Perusahaan Gas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lotte Chemical position performs unexpectedly, Perusahaan Gas 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 Perusahaan Gas will offset losses from the drop in Perusahaan Gas' 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 |
| Perusahaan Gas vs. Aneka Tambang Persero | Perusahaan Gas vs. Bukit Asam Tbk | Perusahaan Gas vs. Telkom Indonesia Tbk | Perusahaan Gas vs. Astra International Tbk |
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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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