Correlation Between Lotte Non and MITECH CoLtd

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

Diversification Opportunities for Lotte Non and MITECH CoLtd

-0.37

Correlation Coefficient

Lotte Non  MITECH CoLtd

Very good diversification

The 3 months correlation between Lotte and MITECH is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Lotte Non Life Insurance and MITECH CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MITECH CoLtd 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 MITECH CoLtd. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MITECH CoLtd has no effect on the direction of Lotte Non i.e., Lotte Non and MITECH CoLtd go up and down completely randomly.

Pair Corralation between Lotte Non and MITECH CoLtd

Assuming the 90 days trading horizon Lotte Non Life Insurance is expected to under-perform the MITECH CoLtd. But the stock apears to be less risky and, when comparing its historical volatility, Lotte Non Life Insurance is 1.41 times less risky than MITECH CoLtd. The stock trades about -0.14 of its potential returns per unit of risk. The MITECH CoLtd is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  791,000  in MITECH CoLtd on December 25, 2024 and sell it today you would lose (44,000) from holding MITECH CoLtd or give up 5.56% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.25%
Values	Daily Returns

Lotte Non Life Insurance  vs.  MITECH CoLtd

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 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.

MITECH CoLtd

Risk-Adjusted Performance

Very Weak

Over the last 90 days MITECH CoLtd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, MITECH CoLtd 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 and MITECH CoLtd

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

The idea behind Lotte Non Life Insurance and MITECH CoLtd 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.