Correlation Between GS Engineering and Lotte Non

Can any of the company-specific risk be diversified away by investing in both GS Engineering and Lotte Non 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 GS Engineering and Lotte Non into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between GS Engineering Construction and Lotte Non Life, you can compare the effects of market volatilities on GS Engineering and Lotte Non 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 GS Engineering with a short position of Lotte Non. Check out your portfolio center. Please also check ongoing floating volatility patterns of GS Engineering and Lotte Non.

Diversification Opportunities for GS Engineering and Lotte Non

0.01

Correlation Coefficient

GS Engineering  Lotte Non

Significant diversification

The 3 months correlation between 006360 and Lotte is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding GS Engineering Construction and Lotte Non Life in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lotte Non Life and GS Engineering 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 GS Engineering Construction are associated (or correlated) with Lotte Non. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lotte Non Life has no effect on the direction of GS Engineering i.e., GS Engineering and Lotte Non go up and down completely randomly.

Pair Corralation between GS Engineering and Lotte Non

Assuming the 90 days trading horizon GS Engineering Construction is expected to generate 0.94 times more return on investment than Lotte Non. However, GS Engineering Construction is 1.07 times less risky than Lotte Non. It trades about 0.02 of its potential returns per unit of risk. Lotte Non Life is currently generating about -0.07 per unit of risk. If you would invest  1,781,000  in GS Engineering Construction on October 7, 2024 and sell it today you would earn a total of  14,000  from holding GS Engineering Construction or generate 0.79% return on investment over 90 days.

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

GS Engineering Construction  vs.  Lotte Non Life

GS Engineering Const

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in GS Engineering Construction are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, GS Engineering is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Lotte Non Life

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lotte Non Life 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.

Pair Trading with GS Engineering and Lotte Non

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

The idea behind GS Engineering Construction and Lotte Non Life 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..