Correlation Between CU Medical and Lotte Chilsung

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

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

Diversification Opportunities for CU Medical and Lotte Chilsung

0.21

Correlation Coefficient

CU Medical  Lotte Chilsung

Modest diversification

The 3 months correlation between 115480 and Lotte is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding CU Medical Systems and Lotte Chilsung Beverage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lotte Chilsung Beverage and CU Medical 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 CU Medical Systems are associated (or correlated) with Lotte Chilsung. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lotte Chilsung Beverage has no effect on the direction of CU Medical i.e., CU Medical and Lotte Chilsung go up and down completely randomly.

Pair Corralation between CU Medical and Lotte Chilsung

Assuming the 90 days trading horizon CU Medical Systems is expected to under-perform the Lotte Chilsung. But the stock apears to be less risky and, when comparing its historical volatility, CU Medical Systems is 1.05 times less risky than Lotte Chilsung. The stock trades about -0.17 of its potential returns per unit of risk. The Lotte Chilsung Beverage is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  11,550,000  in Lotte Chilsung Beverage on December 24, 2024 and sell it today you would lose (360,000) from holding Lotte Chilsung Beverage or give up 3.12% of portfolio value over 90 days.

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

CU Medical Systems  vs.  Lotte Chilsung Beverage

CU Medical Systems

Risk-Adjusted Performance

Very Weak

Over the last 90 days CU Medical Systems has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Lotte Chilsung Beverage

Risk-Adjusted Performance

Very Weak

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

Pair Trading with CU Medical and Lotte Chilsung

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

The idea behind CU Medical Systems and Lotte Chilsung Beverage 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.