Correlation Between Lotte Non and Dragonfly

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

By analyzing existing cross correlation between Lotte Non Life Insurance and Dragonfly GF Co, you can compare the effects of market volatilities on Lotte Non and Dragonfly 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 Dragonfly. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lotte Non and Dragonfly.

Diversification Opportunities for Lotte Non and Dragonfly

-0.15

Correlation Coefficient

Lotte Non  Dragonfly

Good diversification

The 3 months correlation between Lotte and Dragonfly is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Lotte Non Life Insurance and Dragonfly GF Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dragonfly GF 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 Insurance are associated (or correlated) with Dragonfly. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dragonfly GF has no effect on the direction of Lotte Non i.e., Lotte Non and Dragonfly go up and down completely randomly.

Pair Corralation between Lotte Non and Dragonfly

Assuming the 90 days trading horizon Lotte Non Life Insurance is expected to under-perform the Dragonfly. But the stock apears to be less risky and, when comparing its historical volatility, Lotte Non Life Insurance is 3.51 times less risky than Dragonfly. The stock trades about -0.05 of its potential returns per unit of risk. The Dragonfly GF Co is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  118,500  in Dragonfly GF Co on October 24, 2024 and sell it today you would earn a total of  14,600  from holding Dragonfly GF Co or generate 12.32% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	75.41%
Values	Daily Returns

Lotte Non Life Insurance  vs.  Dragonfly GF Co

Lotte Non Life

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lotte Non Life Insurance has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Dragonfly GF

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Dragonfly GF Co are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Dragonfly sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lotte Non and Dragonfly

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

The idea behind Lotte Non Life Insurance and Dragonfly GF 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.