Correlation Between Lotte Chilsung and Q Capital

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

Diversification Opportunities for Lotte Chilsung and Q Capital

-0.5

Correlation Coefficient

Lotte Chilsung  Q Capital

Very good diversification

The 3 months correlation between Lotte and 016600 is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Lotte Chilsung Beverage and Q Capital Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Q Capital Partners 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 Q Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Q Capital Partners has no effect on the direction of Lotte Chilsung i.e., Lotte Chilsung and Q Capital go up and down completely randomly.

Pair Corralation between Lotte Chilsung and Q Capital

Assuming the 90 days trading horizon Lotte Chilsung Beverage is expected to under-perform the Q Capital. But the stock apears to be less risky and, when comparing its historical volatility, Lotte Chilsung Beverage is 1.91 times less risky than Q Capital. The stock trades about -0.03 of its potential returns per unit of risk. The Q Capital Partners is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  23,800  in Q Capital Partners on December 24, 2024 and sell it today you would earn a total of  2,100  from holding Q Capital Partners or generate 8.82% 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.  Q Capital Partners

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.

Q Capital Partners

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Q Capital Partners are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Q Capital may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Lotte Chilsung and Q Capital

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

The idea behind Lotte Chilsung Beverage and Q Capital Partners 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.