Correlation Between Lotte Chilsung and NH Investment

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

Diversification Opportunities for Lotte Chilsung and NH Investment

-0.42

Correlation Coefficient

Lotte Chilsung  NH Investment

Very good diversification

The 3 months correlation between Lotte and 005940 is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Lotte Chilsung Beverage and NH Investment Securities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NH Investment Securities 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 NH Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NH Investment Securities has no effect on the direction of Lotte Chilsung i.e., Lotte Chilsung and NH Investment go up and down completely randomly.

Pair Corralation between Lotte Chilsung and NH Investment

Assuming the 90 days trading horizon Lotte Chilsung Beverage is expected to under-perform the NH Investment. In addition to that, Lotte Chilsung is 1.05 times more volatile than NH Investment Securities. It trades about -0.05 of its total potential returns per unit of risk. NH Investment Securities is currently generating about 0.06 per unit of volatility. If you would invest  1,422,000  in NH Investment Securities on December 23, 2024 and sell it today you would earn a total of  63,000  from holding NH Investment Securities or generate 4.43% return on investment over 90 days.

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

Lotte Chilsung Beverage  vs.  NH Investment Securities

Lotte Chilsung Beverage

Risk-Adjusted Performance

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 somewhat strong basic indicators, Lotte Chilsung is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

NH Investment Securities

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in NH Investment Securities are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, NH Investment 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 NH Investment

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

The idea behind Lotte Chilsung Beverage and NH Investment Securities 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.

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.