Correlation Between Lotte Rental and Shin Steel

Can any of the company-specific risk be diversified away by investing in both Lotte Rental and Shin Steel 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 Shin Steel 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 Shin Steel Co, you can compare the effects of market volatilities on Lotte Rental and Shin Steel 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 Shin Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lotte Rental and Shin Steel.

Diversification Opportunities for Lotte Rental and Shin Steel

-0.21

Correlation Coefficient

Lotte Rental  Shin Steel

Very good diversification

The 3 months correlation between Lotte and Shin is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Lotte Rental Co and Shin Steel Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shin Steel 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 Shin Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shin Steel has no effect on the direction of Lotte Rental i.e., Lotte Rental and Shin Steel go up and down completely randomly.

Pair Corralation between Lotte Rental and Shin Steel

Assuming the 90 days trading horizon Lotte Rental Co is expected to generate 0.36 times more return on investment than Shin Steel. However, Lotte Rental Co is 2.77 times less risky than Shin Steel. It trades about 0.02 of its potential returns per unit of risk. Shin Steel Co is currently generating about -0.04 per unit of risk. If you would invest  2,670,000  in Lotte Rental Co on October 10, 2024 and sell it today you would earn a total of  320,000  from holding Lotte Rental Co or generate 11.99% return on investment over 90 days.

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

Lotte Rental Co  vs.  Shin Steel Co

Lotte Rental

Risk-Adjusted Performance

0 of 100

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.

Shin Steel

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Lotte Rental and Shin Steel

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

The idea behind Lotte Rental Co and Shin Steel Co 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 CEOs Directory module to screen CEOs from public companies around the world.