Correlation Between Lotte Non and Dongjin Semichem

Can any of the company-specific risk be diversified away by investing in both Lotte Non and Dongjin Semichem 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 Non and Dongjin Semichem into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Lotte Non Life and Dongjin Semichem Co, you can compare the effects of market volatilities on Lotte Non and Dongjin Semichem 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 Non with a short position of Dongjin Semichem. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lotte Non and Dongjin Semichem.

Diversification Opportunities for Lotte Non and Dongjin Semichem

0.86

Correlation Coefficient

Lotte Non  Dongjin Semichem

Very poor diversification

The 3 months correlation between Lotte and Dongjin is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Lotte Non Life and Dongjin Semichem Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dongjin Semichem and Lotte Non 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 Non Life are associated (or correlated) with Dongjin Semichem. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dongjin Semichem has no effect on the direction of Lotte Non i.e., Lotte Non and Dongjin Semichem go up and down completely randomly.

Pair Corralation between Lotte Non and Dongjin Semichem

Assuming the 90 days trading horizon Lotte Non Life is expected to generate 0.81 times more return on investment than Dongjin Semichem. However, Lotte Non Life is 1.24 times less risky than Dongjin Semichem. It trades about -0.19 of its potential returns per unit of risk. Dongjin Semichem Co is currently generating about -0.17 per unit of risk. If you would invest  271,000  in Lotte Non Life on September 3, 2024 and sell it today you would lose (67,500) from holding Lotte Non Life or give up 24.91% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Lotte Non Life  vs.  Dongjin Semichem Co

Lotte Non Life

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lotte Non Life has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Dongjin Semichem

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dongjin Semichem Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Lotte Non and Dongjin Semichem

The main advantage of trading using opposite Lotte Non and Dongjin Semichem positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lotte Non position performs unexpectedly, Dongjin Semichem 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 Dongjin Semichem will offset losses from the drop in Dongjin Semichem's long position.

The idea behind Lotte Non Life and Dongjin Semichem Co 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.

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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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.