Correlation Between Lotte Chemical and Playgram

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

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

Diversification Opportunities for Lotte Chemical and Playgram

0.02

Correlation Coefficient

Lotte Chemical  Playgram

Significant diversification

The 3 months correlation between Lotte and Playgram is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Lotte Chemical Corp and Playgram Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Playgram and Lotte Chemical 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 Chemical Corp are associated (or correlated) with Playgram. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Playgram has no effect on the direction of Lotte Chemical i.e., Lotte Chemical and Playgram go up and down completely randomly.

Pair Corralation between Lotte Chemical and Playgram

Assuming the 90 days trading horizon Lotte Chemical Corp is expected to under-perform the Playgram. In addition to that, Lotte Chemical is 1.18 times more volatile than Playgram Co. It trades about -0.09 of its total potential returns per unit of risk. Playgram Co is currently generating about 0.01 per unit of volatility. If you would invest  37,500  in Playgram Co on September 3, 2024 and sell it today you would lose (600.00) from holding Playgram Co or give up 1.6% of portfolio value over 90 days.

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

Lotte Chemical Corp  vs.  Playgram Co

Lotte Chemical Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lotte Chemical Corp 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.

Playgram

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Playgram Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Playgram 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 Chemical and Playgram

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

The idea behind Lotte Chemical Corp and Playgram Co 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.