Correlation Between Shin Steel and Lotte Non

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

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

Diversification Opportunities for Shin Steel and Lotte Non

0.65

Correlation Coefficient

Shin Steel  Lotte Non

Poor diversification

The 3 months correlation between Shin and Lotte is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Shin Steel Co and Lotte Non Life Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lotte Non Life and Shin Steel 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 Shin Steel Co are associated (or correlated) with Lotte Non. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lotte Non Life has no effect on the direction of Shin Steel i.e., Shin Steel and Lotte Non go up and down completely randomly.

Pair Corralation between Shin Steel and Lotte Non

Assuming the 90 days trading horizon Shin Steel Co is expected to generate 1.34 times more return on investment than Lotte Non. However, Shin Steel is 1.34 times more volatile than Lotte Non Life Insurance. It trades about 0.48 of its potential returns per unit of risk. Lotte Non Life Insurance is currently generating about 0.33 per unit of risk. If you would invest  206,000  in Shin Steel Co on October 8, 2024 and sell it today you would earn a total of  54,500  from holding Shin Steel Co or generate 26.46% return on investment over 90 days.

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

Shin Steel Co  vs.  Lotte Non Life Insurance

Shin Steel

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Shin Steel Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Lotte Non Life

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lotte Non Life Insurance has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Shin Steel and Lotte Non

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

The idea behind Shin Steel Co and Lotte Non Life Insurance 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.