Correlation Between Taekwang Ind and Lotte Non-Life

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

By analyzing existing cross correlation between Taekwang Ind and Lotte Non Life Insurance, you can compare the effects of market volatilities on Taekwang Ind and Lotte Non-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 Taekwang Ind with a short position of Lotte Non-Life. Check out your portfolio center. Please also check ongoing floating volatility patterns of Taekwang Ind and Lotte Non-Life.

Diversification Opportunities for Taekwang Ind and Lotte Non-Life

-0.75

Correlation Coefficient

Taekwang Ind  Lotte Non-Life

Pay attention - limited upside

The 3 months correlation between Taekwang and Lotte is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Taekwang Ind and Lotte Non Life Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lotte Non Life and Taekwang Ind 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 Taekwang Ind are associated (or correlated) with Lotte Non-Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lotte Non Life has no effect on the direction of Taekwang Ind i.e., Taekwang Ind and Lotte Non-Life go up and down completely randomly.

Pair Corralation between Taekwang Ind and Lotte Non-Life

Assuming the 90 days trading horizon Taekwang Ind is expected to generate 0.85 times more return on investment than Lotte Non-Life. However, Taekwang Ind is 1.18 times less risky than Lotte Non-Life. It trades about 0.14 of its potential returns per unit of risk. Lotte Non Life Insurance is currently generating about -0.09 per unit of risk. If you would invest  62,400,000  in Taekwang Ind on December 1, 2024 and sell it today you would earn a total of  9,300,000  from holding Taekwang Ind or generate 14.9% return on investment over 90 days.

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

Taekwang Ind  vs.  Lotte Non Life Insurance

Taekwang Ind

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Taekwang Ind are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Taekwang Ind sustained solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Taekwang Ind and Lotte Non-Life

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

The idea behind Taekwang Ind and Lotte Non 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.