Correlation Between Lotte Fine and PJ Electronics
Can any of the company-specific risk be diversified away by investing in both Lotte Fine and PJ Electronics 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 PJ Electronics 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 PJ Electronics Co, you can compare the effects of market volatilities on Lotte Fine and PJ Electronics 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 PJ Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lotte Fine and PJ Electronics.
Diversification Opportunities for Lotte Fine and PJ Electronics
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Lotte and 006140 is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Lotte Fine Chemical and PJ Electronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PJ Electronics 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 PJ Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PJ Electronics has no effect on the direction of Lotte Fine i.e., Lotte Fine and PJ Electronics go up and down completely randomly.
Pair Corralation between Lotte Fine and PJ Electronics
Assuming the 90 days trading horizon Lotte Fine Chemical is expected to generate 0.79 times more return on investment than PJ Electronics. However, Lotte Fine Chemical is 1.26 times less risky than PJ Electronics. It trades about -0.02 of its potential returns per unit of risk. PJ Electronics Co is currently generating about -0.02 per unit of risk. If you would invest 5,700,000 in Lotte Fine Chemical on October 24, 2024 and sell it today you would lose (1,615,000) from holding Lotte Fine Chemical or give up 28.33% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Lotte Fine Chemical vs. PJ Electronics Co
Performance |
Timeline |
Lotte Fine Chemical |
PJ Electronics |
Lotte Fine and PJ Electronics Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Lotte Fine and PJ Electronics
The main advantage of trading using opposite Lotte Fine and PJ Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lotte Fine position performs unexpectedly, PJ Electronics 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 PJ Electronics will offset losses from the drop in PJ Electronics' long position.Lotte Fine vs. Songwon Industrial Co | Lotte Fine vs. Dongil Metal Co | Lotte Fine vs. Nice Information Telecommunication | Lotte Fine vs. Daejung Chemicals Metals |
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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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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