Correlation Between Hanmi Semiconductor and Lotte Chemical

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

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

Diversification Opportunities for Hanmi Semiconductor and Lotte Chemical

-0.4

Correlation Coefficient

Hanmi Semiconductor  Lotte Chemical

Very good diversification

The 3 months correlation between Hanmi and Lotte is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Hanmi Semiconductor Co and Lotte Chemical Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lotte Chemical Corp and Hanmi Semiconductor 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 Hanmi Semiconductor Co are associated (or correlated) with Lotte Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lotte Chemical Corp has no effect on the direction of Hanmi Semiconductor i.e., Hanmi Semiconductor and Lotte Chemical go up and down completely randomly.

Pair Corralation between Hanmi Semiconductor and Lotte Chemical

Assuming the 90 days trading horizon Hanmi Semiconductor Co is expected to generate 1.32 times more return on investment than Lotte Chemical. However, Hanmi Semiconductor is 1.32 times more volatile than Lotte Chemical Corp. It trades about 0.12 of its potential returns per unit of risk. Lotte Chemical Corp is currently generating about 0.02 per unit of risk. If you would invest  7,230,000  in Hanmi Semiconductor Co on December 2, 2024 and sell it today you would earn a total of  2,120,000  from holding Hanmi Semiconductor Co or generate 29.32% return on investment over 90 days.

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

Hanmi Semiconductor Co  vs.  Lotte Chemical Corp

Hanmi Semiconductor

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hanmi Semiconductor Co are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hanmi Semiconductor sustained solid returns over the last few months and may actually be approaching a breakup point.

Lotte Chemical Corp

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Lotte Chemical Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Lotte Chemical is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Hanmi Semiconductor and Lotte Chemical

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

The idea behind Hanmi Semiconductor Co and Lotte Chemical Corp 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.