Correlation Between Settlebank and Lotte Non-Life

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

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

Diversification Opportunities for Settlebank and Lotte Non-Life

0.03

Correlation Coefficient

Settlebank  Lotte Non-Life

Significant diversification

The 3 months correlation between Settlebank and Lotte is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Settlebank and Lotte Non Life in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lotte Non Life and Settlebank 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 Settlebank are associated (or correlated) with Lotte Non-Life. 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 Settlebank i.e., Settlebank and Lotte Non-Life go up and down completely randomly.

Pair Corralation between Settlebank and Lotte Non-Life

Assuming the 90 days trading horizon Settlebank is expected to generate 1.52 times more return on investment than Lotte Non-Life. However, Settlebank is 1.52 times more volatile than Lotte Non Life. It trades about 0.04 of its potential returns per unit of risk. Lotte Non Life is currently generating about -0.19 per unit of risk. If you would invest  1,402,000  in Settlebank on December 2, 2024 and sell it today you would earn a total of  24,000  from holding Settlebank or generate 1.71% return on investment over 90 days.

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

Settlebank  vs.  Lotte Non Life

Settlebank

Risk-Adjusted Performance

Very Weak

Over the last 90 days Settlebank has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Settlebank 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

Very Weak

Over the last 90 days Lotte Non Life 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 Settlebank and Lotte Non-Life

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

The idea behind Settlebank and Lotte Non Life 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.