Correlation Between Hana Financial and Lotte Non

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

By analyzing existing cross correlation between Hana Financial and Lotte Non Life Insurance, you can compare the effects of market volatilities on Hana Financial and Lotte Non 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 Hana Financial with a short position of Lotte Non. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hana Financial and Lotte Non.

Diversification Opportunities for Hana Financial and Lotte Non

0.36

Correlation Coefficient

Hana Financial  Lotte Non

Weak diversification

The 3 months correlation between Hana and Lotte is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Hana Financial 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 Hana Financial 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 Hana Financial are associated (or correlated) with Lotte Non. 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 Hana Financial i.e., Hana Financial and Lotte Non go up and down completely randomly.

Pair Corralation between Hana Financial and Lotte Non

Assuming the 90 days trading horizon Hana Financial is expected to under-perform the Lotte Non. But the stock apears to be less risky and, when comparing its historical volatility, Hana Financial is 1.26 times less risky than Lotte Non. The stock trades about -0.09 of its potential returns per unit of risk. The Lotte Non Life Insurance is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  200,000  in Lotte Non Life Insurance on October 6, 2024 and sell it today you would earn a total of  4,000  from holding Lotte Non Life Insurance or generate 2.0% return on investment over 90 days.

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

Hana Financial  vs.  Lotte Non Life Insurance

Hana Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hana Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

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 latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Hana Financial and Lotte Non

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

The idea behind Hana Financial 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.