Correlation Between Sung Bo and Lotte Fine

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

By analyzing existing cross correlation between Sung Bo Chemicals and Lotte Fine Chemical, you can compare the effects of market volatilities on Sung Bo and Lotte Fine 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 Sung Bo with a short position of Lotte Fine. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sung Bo and Lotte Fine.

Diversification Opportunities for Sung Bo and Lotte Fine

0.72

Correlation Coefficient

Sung Bo  Lotte Fine

Poor diversification

The 3 months correlation between Sung and Lotte is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Sung Bo Chemicals and Lotte Fine Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lotte Fine Chemical and Sung Bo 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 Sung Bo Chemicals are associated (or correlated) with Lotte Fine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lotte Fine Chemical has no effect on the direction of Sung Bo i.e., Sung Bo and Lotte Fine go up and down completely randomly.

Pair Corralation between Sung Bo and Lotte Fine

Assuming the 90 days trading horizon Sung Bo Chemicals is expected to under-perform the Lotte Fine. But the stock apears to be less risky and, when comparing its historical volatility, Sung Bo Chemicals is 1.99 times less risky than Lotte Fine. The stock trades about -0.05 of its potential returns per unit of risk. The Lotte Fine Chemical is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  4,465,000  in Lotte Fine Chemical on October 17, 2024 and sell it today you would lose (470,000) from holding Lotte Fine Chemical or give up 10.53% of portfolio value over 90 days.

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

Sung Bo Chemicals  vs.  Lotte Fine Chemical

Sung Bo Chemicals

Risk-Adjusted Performance

2 of 100

Weak

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

Lotte Fine Chemical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lotte Fine Chemical 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 February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Sung Bo and Lotte Fine

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

The idea behind Sung Bo Chemicals and Lotte Fine Chemical 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 Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.