Correlation Between Lotte Fine and APS Holdings

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

Diversification Opportunities for Lotte Fine and APS Holdings

-0.15

Correlation Coefficient

Lotte Fine  APS Holdings

Good diversification

The 3 months correlation between Lotte and APS is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Lotte Fine Chemical and APS Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on APS Holdings 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 APS Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of APS Holdings has no effect on the direction of Lotte Fine i.e., Lotte Fine and APS Holdings go up and down completely randomly.

Pair Corralation between Lotte Fine and APS Holdings

Assuming the 90 days trading horizon Lotte Fine Chemical is expected to under-perform the APS Holdings. In addition to that, Lotte Fine is 1.21 times more volatile than APS Holdings. It trades about -0.13 of its total potential returns per unit of risk. APS Holdings is currently generating about 0.01 per unit of volatility. If you would invest  544,000  in APS Holdings on September 12, 2024 and sell it today you would earn a total of  1,000.00  from holding APS Holdings or generate 0.18% return on investment over 90 days.

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

Lotte Fine Chemical  vs.  APS Holdings

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 January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

APS Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind Lotte Fine Chemical and APS Holdings 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.