Correlation Between Lotte Non-Life and Taegu Broadcasting

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

Diversification Opportunities for Lotte Non-Life and Taegu Broadcasting

0.32

Correlation Coefficient

Lotte Non-Life  Taegu Broadcasting

Weak diversification

The 3 months correlation between Lotte and Taegu is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Lotte Non Life Insurance and Taegu Broadcasting in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taegu Broadcasting 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 Taegu Broadcasting. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taegu Broadcasting has no effect on the direction of Lotte Non-Life i.e., Lotte Non-Life and Taegu Broadcasting go up and down completely randomly.

Pair Corralation between Lotte Non-Life and Taegu Broadcasting

Assuming the 90 days trading horizon Lotte Non Life Insurance is expected to under-perform the Taegu Broadcasting. In addition to that, Lotte Non-Life is 1.04 times more volatile than Taegu Broadcasting. It trades about -0.17 of its total potential returns per unit of risk. Taegu Broadcasting is currently generating about -0.1 per unit of volatility. If you would invest  84,300  in Taegu Broadcasting on November 29, 2024 and sell it today you would lose (3,300) from holding Taegu Broadcasting or give up 3.91% 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.  Taegu Broadcasting

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.

Taegu Broadcasting

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Taegu Broadcasting are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Taegu Broadcasting is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Lotte Non-Life and Taegu Broadcasting

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

The idea behind Lotte Non Life Insurance and Taegu Broadcasting 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.

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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.