Correlation Between Innodep and Lotte Data

Can any of the company-specific risk be diversified away by investing in both Innodep and Lotte Data 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 Innodep and Lotte Data into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Innodep and Lotte Data Communication, you can compare the effects of market volatilities on Innodep and Lotte Data 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 Innodep with a short position of Lotte Data. Check out your portfolio center. Please also check ongoing floating volatility patterns of Innodep and Lotte Data.

Diversification Opportunities for Innodep and Lotte Data

0.61

Correlation Coefficient

Innodep  Lotte Data

Poor diversification

The 3 months correlation between Innodep and Lotte is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Innodep and Lotte Data Communication in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lotte Data Communication and Innodep 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 Innodep are associated (or correlated) with Lotte Data. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lotte Data Communication has no effect on the direction of Innodep i.e., Innodep and Lotte Data go up and down completely randomly.

Pair Corralation between Innodep and Lotte Data

Assuming the 90 days trading horizon Innodep is expected to generate 1.29 times more return on investment than Lotte Data. However, Innodep is 1.29 times more volatile than Lotte Data Communication. It trades about 0.03 of its potential returns per unit of risk. Lotte Data Communication is currently generating about 0.02 per unit of risk. If you would invest  685,000  in Innodep on December 4, 2024 and sell it today you would earn a total of  19,000  from holding Innodep or generate 2.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.28%
Values	Daily Returns

Innodep  vs.  Lotte Data Communication

Innodep

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Innodep are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Innodep is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Lotte Data Communication

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Lotte Data Communication are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Lotte Data is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Innodep and Lotte Data

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

The idea behind Innodep and Lotte Data Communication 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.