Correlation Between Moonbae Steel and Lotte Non-Life

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

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

Diversification Opportunities for Moonbae Steel and Lotte Non-Life

0.1

Correlation Coefficient

Moonbae Steel  Lotte Non-Life

Average diversification

The 3 months correlation between Moonbae and Lotte is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Moonbae Steel and Lotte Non Life Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lotte Non Life and Moonbae 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 Moonbae Steel are associated (or correlated) with Lotte Non-Life. 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 Moonbae Steel i.e., Moonbae Steel and Lotte Non-Life go up and down completely randomly.

Pair Corralation between Moonbae Steel and Lotte Non-Life

Assuming the 90 days trading horizon Moonbae Steel is expected to under-perform the Lotte Non-Life. In addition to that, Moonbae Steel is 1.2 times more volatile than Lotte Non Life Insurance. It trades about -0.09 of its total potential returns per unit of risk. Lotte Non Life Insurance is currently generating about 0.06 per unit of volatility. If you would invest  195,300  in Lotte Non Life Insurance on September 21, 2024 and sell it today you would earn a total of  5,700  from holding Lotte Non Life Insurance or generate 2.92% return on investment over 90 days.

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

Moonbae Steel  vs.  Lotte Non Life Insurance

Moonbae Steel

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Moonbae Steel are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Moonbae Steel 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 Insurance 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 January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Moonbae Steel and Lotte Non-Life

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

The idea behind Moonbae Steel and Lotte Non Life Insurance 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.