Correlation Between Lotte Chilsung and Hyundai Engineering
Can any of the company-specific risk be diversified away by investing in both Lotte Chilsung and Hyundai Engineering 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 Chilsung and Hyundai Engineering into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lotte Chilsung Beverage and Hyundai Engineering Construction, you can compare the effects of market volatilities on Lotte Chilsung and Hyundai Engineering 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 Chilsung with a short position of Hyundai Engineering. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lotte Chilsung and Hyundai Engineering.
Diversification Opportunities for Lotte Chilsung and Hyundai Engineering
0.36 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Lotte and Hyundai is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Lotte Chilsung Beverage and Hyundai Engineering Constructi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hyundai Engineering and Lotte Chilsung 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 Chilsung Beverage are associated (or correlated) with Hyundai Engineering. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hyundai Engineering has no effect on the direction of Lotte Chilsung i.e., Lotte Chilsung and Hyundai Engineering go up and down completely randomly.
Pair Corralation between Lotte Chilsung and Hyundai Engineering
Assuming the 90 days trading horizon Lotte Chilsung Beverage is expected to under-perform the Hyundai Engineering. But the stock apears to be less risky and, when comparing its historical volatility, Lotte Chilsung Beverage is 1.14 times less risky than Hyundai Engineering. The stock trades about -0.12 of its potential returns per unit of risk. The Hyundai Engineering Construction is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest 2,850,000 in Hyundai Engineering Construction on October 23, 2024 and sell it today you would lose (215,000) from holding Hyundai Engineering Construction or give up 7.54% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Lotte Chilsung Beverage vs. Hyundai Engineering Constructi
Performance |
Timeline |
Lotte Chilsung Beverage |
Hyundai Engineering |
Lotte Chilsung and Hyundai Engineering Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Lotte Chilsung and Hyundai Engineering
The main advantage of trading using opposite Lotte Chilsung and Hyundai Engineering positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lotte Chilsung position performs unexpectedly, Hyundai Engineering 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 Hyundai Engineering will offset losses from the drop in Hyundai Engineering's long position.Lotte Chilsung vs. SungMoon Electronics Co | Lotte Chilsung vs. Daewoo Electronic Components | Lotte Chilsung vs. PJ Electronics Co | Lotte Chilsung vs. DAEDUCK ELECTRONICS CoLtd |
Hyundai Engineering vs. BIT Computer Co | Hyundai Engineering vs. Display Tech Co | Hyundai Engineering vs. BooKook Steel Co | Hyundai Engineering vs. Korea Computer |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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