Correlation Between Ni Steel and Lotte Data

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

By analyzing existing cross correlation between Ni Steel and Lotte Data Communication, you can compare the effects of market volatilities on Ni Steel and Lotte Data 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 Ni Steel with a short position of Lotte Data. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ni Steel and Lotte Data.

Diversification Opportunities for Ni Steel and Lotte Data

0.69

Correlation Coefficient

Ni Steel  Lotte Data

Poor diversification

The 3 months correlation between 008260 and Lotte is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Ni Steel and Lotte Data Communication in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lotte Data Communication and Ni Steel 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 Ni Steel are associated (or correlated) with Lotte Data. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lotte Data Communication has no effect on the direction of Ni Steel i.e., Ni Steel and Lotte Data go up and down completely randomly.

Pair Corralation between Ni Steel and Lotte Data

Assuming the 90 days trading horizon Ni Steel is expected to generate 1.0 times more return on investment than Lotte Data. However, Ni Steel is 1.0 times more volatile than Lotte Data Communication. It trades about -0.05 of its potential returns per unit of risk. Lotte Data Communication is currently generating about -0.08 per unit of risk. If you would invest  389,500  in Ni Steel on October 22, 2024 and sell it today you would lose (33,500) from holding Ni Steel or give up 8.6% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.41%
Values	Daily Returns

Ni Steel  vs.  Lotte Data Communication

Ni Steel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ni Steel 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.

Lotte Data Communication

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lotte Data Communication has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Ni Steel and Lotte Data

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

The idea behind Ni Steel and Lotte Data Communication 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 Transaction History module to view history of all your transactions and understand their impact on performance.