Correlation Between FarmStory and Lotte Energy
Can any of the company-specific risk be diversified away by investing in both FarmStory 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 FarmStory and Lotte Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between FarmStory Co and Lotte Energy Materials, you can compare the effects of market volatilities on FarmStory 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 FarmStory with a short position of Lotte Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of FarmStory and Lotte Energy.
Diversification Opportunities for FarmStory and Lotte Energy
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between FarmStory and Lotte is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding FarmStory Co 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 FarmStory 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 FarmStory Co 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 FarmStory i.e., FarmStory and Lotte Energy go up and down completely randomly.
Pair Corralation between FarmStory and Lotte Energy
Assuming the 90 days trading horizon FarmStory Co is expected to generate 0.63 times more return on investment than Lotte Energy. However, FarmStory Co is 1.59 times less risky than Lotte Energy. It trades about -0.21 of its potential returns per unit of risk. Lotte Energy Materials is currently generating about -0.35 per unit of risk. If you would invest 129,900 in FarmStory Co on September 11, 2024 and sell it today you would lose (28,100) from holding FarmStory Co or give up 21.63% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Strong |
Accuracy | 100.0% |
Values | Daily Returns |
FarmStory Co vs. Lotte Energy Materials
Performance |
Timeline |
FarmStory |
Lotte Energy Materials |
FarmStory and Lotte Energy Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with FarmStory and Lotte Energy
The main advantage of trading using opposite FarmStory and Lotte Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FarmStory 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.FarmStory vs. LB Investment | FarmStory vs. Korea Investment Holdings | FarmStory vs. Korean Air Lines | FarmStory vs. Atinum Investment Co |
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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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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