Correlation Between Lotte Data and FnGuide

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

Diversification Opportunities for Lotte Data and FnGuide

0.64

Correlation Coefficient

Lotte Data  FnGuide

Poor diversification

The 3 months correlation between Lotte and FnGuide is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Lotte Data Communication and FnGuide in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FnGuide 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 FnGuide. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FnGuide has no effect on the direction of Lotte Data i.e., Lotte Data and FnGuide go up and down completely randomly.

Pair Corralation between Lotte Data and FnGuide

Assuming the 90 days trading horizon Lotte Data Communication is expected to under-perform the FnGuide. But the stock apears to be less risky and, when comparing its historical volatility, Lotte Data Communication is 2.46 times less risky than FnGuide. The stock trades about -0.07 of its potential returns per unit of risk. The FnGuide is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  701,000  in FnGuide on October 4, 2024 and sell it today you would earn a total of  81,000  from holding FnGuide or generate 11.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.16%
Values	Daily Returns

Lotte Data Communication  vs.  FnGuide

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 weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

FnGuide

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FnGuide has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Lotte Data and FnGuide

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

The idea behind Lotte Data Communication and FnGuide 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.

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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.