Correlation Between Lotte Non-Life and Samsung Life

Can any of the company-specific risk be diversified away by investing in both Lotte Non-Life and Samsung Life 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-Life and Samsung Life 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 Samsung Life Insurance, you can compare the effects of market volatilities on Lotte Non-Life and Samsung Life 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-Life with a short position of Samsung Life. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lotte Non-Life and Samsung Life.

Diversification Opportunities for Lotte Non-Life and Samsung Life

0.27

Correlation Coefficient

Lotte Non-Life  Samsung Life

Modest diversification

The 3 months correlation between Lotte and Samsung is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Lotte Non Life Insurance and Samsung Life Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Samsung Life Insurance and Lotte Non-Life 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 Samsung Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Samsung Life Insurance has no effect on the direction of Lotte Non-Life i.e., Lotte Non-Life and Samsung Life go up and down completely randomly.

Pair Corralation between Lotte Non-Life and Samsung Life

Assuming the 90 days trading horizon Lotte Non Life Insurance is expected to generate 0.73 times more return on investment than Samsung Life. However, Lotte Non Life Insurance is 1.38 times less risky than Samsung Life. It trades about -0.09 of its potential returns per unit of risk. Samsung Life Insurance is currently generating about -0.08 per unit of risk. If you would invest  205,000  in Lotte Non Life Insurance on December 1, 2024 and sell it today you would lose (24,000) from holding Lotte Non Life Insurance or give up 11.71% of portfolio value over 90 days.

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

Lotte Non Life Insurance  vs.  Samsung Life Insurance

Lotte Non Life

Risk-Adjusted Performance

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.

Samsung Life Insurance

Risk-Adjusted Performance

Very Weak

Over the last 90 days Samsung Life Insurance 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 April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Lotte Non-Life and Samsung Life

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

The idea behind Lotte Non Life Insurance and Samsung Life Insurance 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.