Correlation Between Lotte Data and Dongkuk Structures

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

Diversification Opportunities for Lotte Data and Dongkuk Structures

0.69

Correlation Coefficient

Lotte Data  Dongkuk Structures

Poor diversification

The 3 months correlation between Lotte and Dongkuk is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Lotte Data Communication and Dongkuk Structures Constructio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dongkuk Structures 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 Dongkuk Structures. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dongkuk Structures has no effect on the direction of Lotte Data i.e., Lotte Data and Dongkuk Structures go up and down completely randomly.

Pair Corralation between Lotte Data and Dongkuk Structures

Assuming the 90 days trading horizon Lotte Data is expected to generate 1.11 times less return on investment than Dongkuk Structures. But when comparing it to its historical volatility, Lotte Data Communication is 1.09 times less risky than Dongkuk Structures. It trades about 0.2 of its potential returns per unit of risk. Dongkuk Structures Construction is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  228,000  in Dongkuk Structures Construction on October 12, 2024 and sell it today you would earn a total of  19,000  from holding Dongkuk Structures Construction or generate 8.33% return on investment over 90 days.

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

Lotte Data Communication  vs.  Dongkuk Structures Constructio

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.

Dongkuk Structures

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dongkuk Structures Construction 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 Lotte Data and Dongkuk Structures

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

The idea behind Lotte Data Communication and Dongkuk Structures Construction 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.