Correlation Between Lotte Chemical and Champion Pacific

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

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

Diversification Opportunities for Lotte Chemical and Champion Pacific

-0.2

Correlation Coefficient

Lotte Chemical  Champion Pacific

Good diversification

The 3 months correlation between Lotte and Champion is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Lotte Chemical Titan and Champion Pacific Indonesia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Champion Pacific Ind and Lotte Chemical 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 Chemical Titan are associated (or correlated) with Champion Pacific. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Champion Pacific Ind has no effect on the direction of Lotte Chemical i.e., Lotte Chemical and Champion Pacific go up and down completely randomly.

Pair Corralation between Lotte Chemical and Champion Pacific

Assuming the 90 days trading horizon Lotte Chemical Titan is expected to generate 1.82 times more return on investment than Champion Pacific. However, Lotte Chemical is 1.82 times more volatile than Champion Pacific Indonesia. It trades about 0.04 of its potential returns per unit of risk. Champion Pacific Indonesia is currently generating about 0.05 per unit of risk. If you would invest  18,400  in Lotte Chemical Titan on September 12, 2024 and sell it today you would earn a total of  800.00  from holding Lotte Chemical Titan or generate 4.35% return on investment over 90 days.

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

Lotte Chemical Titan  vs.  Champion Pacific Indonesia

Lotte Chemical Titan

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Lotte Chemical Titan are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Lotte Chemical may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Champion Pacific Ind

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Champion Pacific Indonesia are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward-looking signals, Champion Pacific is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Lotte Chemical and Champion Pacific

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

The idea behind Lotte Chemical Titan and Champion Pacific Indonesia 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.