Correlation Between Kyung Chang and Lotte Energy
Can any of the company-specific risk be diversified away by investing in both Kyung Chang and Lotte Energy 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 Kyung Chang and Lotte Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Kyung Chang Industrial and Lotte Energy Materials, you can compare the effects of market volatilities on Kyung Chang and Lotte Energy 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 Kyung Chang with a short position of Lotte Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kyung Chang and Lotte Energy.
Diversification Opportunities for Kyung Chang and Lotte Energy
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Kyung and Lotte is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Kyung Chang Industrial and Lotte Energy Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lotte Energy Materials and Kyung Chang 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 Kyung Chang Industrial are associated (or correlated) with Lotte Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lotte Energy Materials has no effect on the direction of Kyung Chang i.e., Kyung Chang and Lotte Energy go up and down completely randomly.
Pair Corralation between Kyung Chang and Lotte Energy
Assuming the 90 days trading horizon Kyung Chang Industrial is expected to generate 0.62 times more return on investment than Lotte Energy. However, Kyung Chang Industrial is 1.61 times less risky than Lotte Energy. It trades about -0.13 of its potential returns per unit of risk. Lotte Energy Materials is currently generating about -0.28 per unit of risk. If you would invest 217,500 in Kyung Chang Industrial on September 10, 2024 and sell it today you would lose (30,200) from holding Kyung Chang Industrial or give up 13.89% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Kyung Chang Industrial vs. Lotte Energy Materials
Performance |
Timeline |
Kyung Chang Industrial |
Lotte Energy Materials |
Kyung Chang and Lotte Energy Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Kyung Chang and Lotte Energy
The main advantage of trading using opposite Kyung Chang and Lotte Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kyung Chang position performs unexpectedly, Lotte Energy 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 Energy will offset losses from the drop in Lotte Energy's long position.Kyung Chang vs. SBI Investment KOREA | Kyung Chang vs. DB Insurance Co | Kyung Chang vs. MediaZen | Kyung Chang vs. Worldex Industry Trading |
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Check out your portfolio center.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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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