Correlation Between ENERGYMACHINERY KOREA and Lotte Data

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

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

Diversification Opportunities for ENERGYMACHINERY KOREA and Lotte Data

0.52

Correlation Coefficient

ENERGYMACHINERY KOREA  Lotte Data

Very weak diversification

The 3 months correlation between ENERGYMACHINERY and Lotte is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding ENERGYMACHINERY KOREA CoLtd and Lotte Data Communication in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lotte Data Communication and ENERGYMACHINERY KOREA 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 ENERGYMACHINERY KOREA CoLtd are associated (or correlated) with Lotte Data. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lotte Data Communication has no effect on the direction of ENERGYMACHINERY KOREA i.e., ENERGYMACHINERY KOREA and Lotte Data go up and down completely randomly.

Pair Corralation between ENERGYMACHINERY KOREA and Lotte Data

Assuming the 90 days trading horizon ENERGYMACHINERY KOREA CoLtd is expected to generate 0.9 times more return on investment than Lotte Data. However, ENERGYMACHINERY KOREA CoLtd is 1.11 times less risky than Lotte Data. It trades about -0.01 of its potential returns per unit of risk. Lotte Data Communication is currently generating about -0.01 per unit of risk. If you would invest  277,500  in ENERGYMACHINERY KOREA CoLtd on December 4, 2024 and sell it today you would lose (68,500) from holding ENERGYMACHINERY KOREA CoLtd or give up 24.68% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.79%
Values	Daily Returns

ENERGYMACHINERY KOREA CoLtd  vs.  Lotte Data Communication

ENERGYMACHINERY KOREA

Risk-Adjusted Performance

Good

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

Lotte Data Communication

Risk-Adjusted Performance

Insignificant

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

Pair Trading with ENERGYMACHINERY KOREA and Lotte Data

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

The idea behind ENERGYMACHINERY KOREA CoLtd and Lotte Data Communication 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.

Check out your portfolio center.

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 Transaction History module to view history of all your transactions and understand their impact on performance.