Correlation Between Lotte Rental and Pharmicell

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

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

Diversification Opportunities for Lotte Rental and Pharmicell

-0.26

Correlation Coefficient

Lotte Rental  Pharmicell

Very good diversification

The 3 months correlation between Lotte and Pharmicell is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Lotte Rental Co and Pharmicell in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pharmicell and Lotte Rental 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 Lotte Rental Co are associated (or correlated) with Pharmicell. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pharmicell has no effect on the direction of Lotte Rental i.e., Lotte Rental and Pharmicell go up and down completely randomly.

Pair Corralation between Lotte Rental and Pharmicell

Assuming the 90 days trading horizon Lotte Rental Co is expected to under-perform the Pharmicell. But the stock apears to be less risky and, when comparing its historical volatility, Lotte Rental Co is 4.16 times less risky than Pharmicell. The stock trades about -0.06 of its potential returns per unit of risk. The Pharmicell is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  798,000  in Pharmicell on December 25, 2024 and sell it today you would earn a total of  359,000  from holding Pharmicell or generate 44.99% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.25%
Values	Daily Returns

Lotte Rental Co  vs.  Pharmicell

Lotte Rental

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lotte Rental Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Lotte Rental is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pharmicell

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Pharmicell are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Pharmicell sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lotte Rental and Pharmicell

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

The idea behind Lotte Rental Co and Pharmicell 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.