Correlation Between Lotte Chilsung and Samyung Trading

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

Diversification Opportunities for Lotte Chilsung and Samyung Trading

0.47

Correlation Coefficient

Lotte Chilsung  Samyung Trading

Very weak diversification

The 3 months correlation between Lotte and Samyung is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Lotte Chilsung Beverage and Samyung Trading Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Samyung Trading 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 Samyung Trading. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Samyung Trading has no effect on the direction of Lotte Chilsung i.e., Lotte Chilsung and Samyung Trading go up and down completely randomly.

Pair Corralation between Lotte Chilsung and Samyung Trading

Assuming the 90 days trading horizon Lotte Chilsung Beverage is expected to under-perform the Samyung Trading. In addition to that, Lotte Chilsung is 3.6 times more volatile than Samyung Trading Co. It trades about -0.07 of its total potential returns per unit of risk. Samyung Trading Co is currently generating about 0.1 per unit of volatility. If you would invest  1,268,000  in Samyung Trading Co on September 2, 2024 and sell it today you would earn a total of  32,000  from holding Samyung Trading Co or generate 2.52% return on investment over 90 days.

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

Lotte Chilsung Beverage  vs.  Samyung Trading Co

Lotte Chilsung Beverage

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lotte Chilsung Beverage 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.

Samyung Trading

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Samyung Trading Co are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Samyung Trading 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 Chilsung and Samyung Trading

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

The idea behind Lotte Chilsung Beverage and Samyung Trading Co 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.