Correlation Between Lotte Data and Daishin Balance

Can any of the company-specific risk be diversified away by investing in both Lotte Data and Daishin Balance 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 Daishin Balance 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 Daishin Balance No8, you can compare the effects of market volatilities on Lotte Data and Daishin Balance 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 Daishin Balance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lotte Data and Daishin Balance.

Diversification Opportunities for Lotte Data and Daishin Balance

0.95

Correlation Coefficient

Lotte Data  Daishin Balance

Almost no diversification

The 3 months correlation between Lotte and Daishin is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Lotte Data Communication and Daishin Balance No8 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daishin Balance No8 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 Daishin Balance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daishin Balance No8 has no effect on the direction of Lotte Data i.e., Lotte Data and Daishin Balance go up and down completely randomly.

Pair Corralation between Lotte Data and Daishin Balance

Assuming the 90 days trading horizon Lotte Data Communication is expected to generate 0.78 times more return on investment than Daishin Balance. However, Lotte Data Communication is 1.29 times less risky than Daishin Balance. It trades about -0.11 of its potential returns per unit of risk. Daishin Balance No8 is currently generating about -0.21 per unit of risk. If you would invest  2,385,000  in Lotte Data Communication on September 20, 2024 and sell it today you would lose (395,000) from holding Lotte Data Communication or give up 16.56% of portfolio value over 90 days.

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

Lotte Data Communication  vs.  Daishin Balance No8

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.

Daishin Balance No8

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Daishin Balance No8 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 Daishin Balance

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

The idea behind Lotte Data Communication and Daishin Balance No8 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.