Correlation Between Lotte Data and ENERGYMACHINERY KOREA

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

Diversification Opportunities for Lotte Data and ENERGYMACHINERY KOREA

0.83

Correlation Coefficient

Lotte Data  ENERGYMACHINERY KOREA

Very poor diversification

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

Pair Corralation between Lotte Data and ENERGYMACHINERY KOREA

Assuming the 90 days trading horizon Lotte Data Communication is expected to under-perform the ENERGYMACHINERY KOREA. But the stock apears to be less risky and, when comparing its historical volatility, Lotte Data Communication is 1.22 times less risky than ENERGYMACHINERY KOREA. The stock trades about -0.13 of its potential returns per unit of risk. The ENERGYMACHINERY KOREA CoLtd is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest  208,000  in ENERGYMACHINERY KOREA CoLtd on September 15, 2024 and sell it today you would lose (31,000) from holding ENERGYMACHINERY KOREA CoLtd or give up 14.9% of portfolio value over 90 days.

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

Lotte Data Communication  vs.  ENERGYMACHINERY KOREA CoLtd

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 January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

ENERGYMACHINERY KOREA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ENERGYMACHINERY KOREA CoLtd 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 January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Lotte Data and ENERGYMACHINERY KOREA

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

The idea behind Lotte Data Communication and ENERGYMACHINERY KOREA CoLtd 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.