Correlation Between Lotte Data and Kiwoom

Can any of the company-specific risk be diversified away by investing in both Lotte Data and Kiwoom 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 Kiwoom 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 Kiwoom, you can compare the effects of market volatilities on Lotte Data and Kiwoom 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 Kiwoom. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lotte Data and Kiwoom.

Diversification Opportunities for Lotte Data and Kiwoom

0.83

Correlation Coefficient

Lotte Data  Kiwoom

Very poor diversification

The 3 months correlation between Lotte and Kiwoom is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Lotte Data Communication and Kiwoom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kiwoom 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 Kiwoom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kiwoom has no effect on the direction of Lotte Data i.e., Lotte Data and Kiwoom go up and down completely randomly.

Pair Corralation between Lotte Data and Kiwoom

Assuming the 90 days trading horizon Lotte Data Communication is expected to generate 0.91 times more return on investment than Kiwoom. However, Lotte Data Communication is 1.09 times less risky than Kiwoom. It trades about 0.33 of its potential returns per unit of risk. Kiwoom is currently generating about 0.28 per unit of risk. If you would invest  1,773,000  in Lotte Data Communication on October 10, 2024 and sell it today you would earn a total of  282,000  from holding Lotte Data Communication or generate 15.91% return on investment over 90 days.

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

Lotte Data Communication  vs.  Kiwoom

Lotte Data Communication

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lotte Data Communication 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.

Kiwoom

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Lotte Data and Kiwoom

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

The idea behind Lotte Data Communication and Kiwoom 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.