Correlation Between Lotte Data and SK Holdings

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

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

Diversification Opportunities for Lotte Data and SK Holdings

0.58

Correlation Coefficient

Lotte Data  SK Holdings

Very weak diversification

The 3 months correlation between Lotte and 034730 is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Lotte Data Communication and SK Holdings Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SK Holdings and Lotte Data 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 Lotte Data Communication are associated (or correlated) with SK Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SK Holdings has no effect on the direction of Lotte Data i.e., Lotte Data and SK Holdings go up and down completely randomly.

Pair Corralation between Lotte Data and SK Holdings

Assuming the 90 days trading horizon Lotte Data Communication is expected to under-perform the SK Holdings. In addition to that, Lotte Data is 1.42 times more volatile than SK Holdings Co. It trades about -0.01 of its total potential returns per unit of risk. SK Holdings Co is currently generating about 0.0 per unit of volatility. If you would invest  17,493,300  in SK Holdings Co on November 20, 2024 and sell it today you would lose (2,573,300) from holding SK Holdings Co or give up 14.71% of portfolio value over 90 days.

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

Lotte Data Communication  vs.  SK Holdings Co

Lotte Data Communication

Risk-Adjusted Performance

Weak

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.

SK Holdings

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SK Holdings Co are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, SK Holdings may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with Lotte Data and SK Holdings

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

The idea behind Lotte Data Communication and SK Holdings Co 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.