Correlation Between Steel Pipe and Lotte Chemical
Can any of the company-specific risk be diversified away by investing in both Steel Pipe 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 Steel Pipe and Lotte Chemical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Steel Pipe Industry and Lotte Chemical Titan, you can compare the effects of market volatilities on Steel Pipe 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 Steel Pipe with a short position of Lotte Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Steel Pipe and Lotte Chemical.
Diversification Opportunities for Steel Pipe and Lotte Chemical
-0.24 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Steel and Lotte is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Steel Pipe Industry 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 Steel Pipe 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 Steel Pipe Industry 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 Steel Pipe i.e., Steel Pipe and Lotte Chemical go up and down completely randomly.
Pair Corralation between Steel Pipe and Lotte Chemical
Assuming the 90 days trading horizon Steel Pipe Industry is expected to under-perform the Lotte Chemical. But the stock apears to be less risky and, when comparing its historical volatility, Steel Pipe Industry is 1.51 times less risky than Lotte Chemical. The stock trades about -0.44 of its potential returns per unit of risk. The Lotte Chemical Titan is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest 20,200 in Lotte Chemical Titan on August 27, 2024 and sell it today you would lose (500.00) from holding Lotte Chemical Titan or give up 2.48% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Steel Pipe Industry vs. Lotte Chemical Titan
Performance |
| Timeline |
| Steel Pipe Industry |
| Lotte Chemical Titan |
Steel Pipe and Lotte Chemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Steel Pipe and Lotte Chemical
The main advantage of trading using opposite Steel Pipe and Lotte Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Steel Pipe 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.| Steel Pipe vs. Semen Baturaja Persero | Steel Pipe vs. Bekasi Fajar Industrial | Steel Pipe vs. Krakatau Steel Persero | Steel Pipe vs. Saranacentral Bajatama Tbk |
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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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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