Correlation Between MS Autotech and Lotte Energy
Can any of the company-specific risk be diversified away by investing in both MS Autotech and Lotte Energy 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 MS Autotech and Lotte Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MS Autotech CoLtd and Lotte Energy Materials, you can compare the effects of market volatilities on MS Autotech and Lotte Energy 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 MS Autotech with a short position of Lotte Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of MS Autotech and Lotte Energy.
Diversification Opportunities for MS Autotech and Lotte Energy
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between 123040 and Lotte is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding MS Autotech CoLtd and Lotte Energy Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lotte Energy Materials and MS Autotech 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 MS Autotech CoLtd are associated (or correlated) with Lotte Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lotte Energy Materials has no effect on the direction of MS Autotech i.e., MS Autotech and Lotte Energy go up and down completely randomly.
Pair Corralation between MS Autotech and Lotte Energy
Assuming the 90 days trading horizon MS Autotech CoLtd is expected to generate 0.8 times more return on investment than Lotte Energy. However, MS Autotech CoLtd is 1.26 times less risky than Lotte Energy. It trades about -0.19 of its potential returns per unit of risk. Lotte Energy Materials is currently generating about -0.28 per unit of risk. If you would invest 326,500 in MS Autotech CoLtd on September 7, 2024 and sell it today you would lose (81,000) from holding MS Autotech CoLtd or give up 24.81% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Strong |
Accuracy | 100.0% |
Values | Daily Returns |
MS Autotech CoLtd vs. Lotte Energy Materials
Performance |
Timeline |
MS Autotech CoLtd |
Lotte Energy Materials |
MS Autotech and Lotte Energy Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with MS Autotech and Lotte Energy
The main advantage of trading using opposite MS Autotech and Lotte Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MS Autotech position performs unexpectedly, Lotte Energy 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 Energy will offset losses from the drop in Lotte Energy's long position.MS Autotech vs. Dongsin Engineering Construction | MS Autotech vs. Total Soft Bank | MS Autotech vs. AptaBio Therapeutics | MS Autotech vs. ASTORY CoLtd |
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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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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