Correlation Between Seohee Construction and Lotte Non-Life

Can any of the company-specific risk be diversified away by investing in both Seohee Construction 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 Seohee Construction 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 Seohee Construction Co and Lotte Non Life Insurance, you can compare the effects of market volatilities on Seohee Construction 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 Seohee Construction with a short position of Lotte Non-Life. Check out your portfolio center. Please also check ongoing floating volatility patterns of Seohee Construction and Lotte Non-Life.

Diversification Opportunities for Seohee Construction and Lotte Non-Life

0.2

Correlation Coefficient

Seohee Construction  Lotte Non-Life

Modest diversification

The 3 months correlation between Seohee and Lotte is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Seohee Construction Co 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 Seohee Construction 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 Seohee Construction Co 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 Seohee Construction i.e., Seohee Construction and Lotte Non-Life go up and down completely randomly.

Pair Corralation between Seohee Construction and Lotte Non-Life

Assuming the 90 days trading horizon Seohee Construction Co is expected to generate 0.74 times more return on investment than Lotte Non-Life. However, Seohee Construction Co is 1.35 times less risky than Lotte Non-Life. It trades about 0.06 of its potential returns per unit of risk. Lotte Non Life Insurance is currently generating about -0.16 per unit of risk. If you would invest  150,000  in Seohee Construction Co on September 12, 2024 and sell it today you would earn a total of  8,300  from holding Seohee Construction Co or generate 5.53% return on investment over 90 days.

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

Seohee Construction Co  vs.  Lotte Non Life Insurance

Seohee Construction

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Seohee Construction Co are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Seohee Construction may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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 Seohee Construction and Lotte Non-Life

The main advantage of trading using opposite Seohee Construction and Lotte Non-Life positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Seohee Construction 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 Seohee Construction Co 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.