Correlation Between Lotte Fine and Dongbu Insurance
Can any of the company-specific risk be diversified away by investing in both Lotte Fine and Dongbu Insurance 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 Fine and Dongbu Insurance into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lotte Fine Chemical and Dongbu Insurance Co, you can compare the effects of market volatilities on Lotte Fine and Dongbu Insurance 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 Fine with a short position of Dongbu Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lotte Fine and Dongbu Insurance.
Diversification Opportunities for Lotte Fine and Dongbu Insurance
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Lotte and Dongbu is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Lotte Fine Chemical and Dongbu Insurance Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dongbu Insurance and Lotte Fine 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 Fine Chemical are associated (or correlated) with Dongbu Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dongbu Insurance has no effect on the direction of Lotte Fine i.e., Lotte Fine and Dongbu Insurance go up and down completely randomly.
Pair Corralation between Lotte Fine and Dongbu Insurance
Assuming the 90 days trading horizon Lotte Fine Chemical is expected to generate 1.02 times more return on investment than Dongbu Insurance. However, Lotte Fine is 1.02 times more volatile than Dongbu Insurance Co. It trades about 0.12 of its potential returns per unit of risk. Dongbu Insurance Co is currently generating about -0.09 per unit of risk. If you would invest 3,690,000 in Lotte Fine Chemical on September 22, 2024 and sell it today you would earn a total of 265,000 from holding Lotte Fine Chemical or generate 7.18% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Lotte Fine Chemical vs. Dongbu Insurance Co
Performance |
Timeline |
Lotte Fine Chemical |
Dongbu Insurance |
Lotte Fine and Dongbu Insurance Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Lotte Fine and Dongbu Insurance
The main advantage of trading using opposite Lotte Fine and Dongbu Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lotte Fine position performs unexpectedly, Dongbu Insurance 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 Dongbu Insurance will offset losses from the drop in Dongbu Insurance's long position.Lotte Fine vs. LG Chemicals | Lotte Fine vs. POSCO Holdings | Lotte Fine vs. Hanwha Solutions | Lotte Fine vs. Lotte Chemical Corp |
Dongbu Insurance vs. Seoyon Topmetal Co | Dongbu Insurance vs. Daejung Chemicals Metals | Dongbu Insurance vs. Duksan Hi Metal | Dongbu Insurance vs. Mobileleader CoLtd |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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