Correlation Between Lotte Chemical and Atlas Insurance

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

By analyzing existing cross correlation between Lotte Chemical Pakistan and Atlas Insurance, you can compare the effects of market volatilities on Lotte Chemical and Atlas Insurance 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 Atlas Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lotte Chemical and Atlas Insurance.

Diversification Opportunities for Lotte Chemical and Atlas Insurance

0.89

Correlation Coefficient

Lotte Chemical  Atlas Insurance

Very poor diversification

The 3 months correlation between Lotte and Atlas is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Lotte Chemical Pakistan and Atlas Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Atlas Insurance 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 Pakistan are associated (or correlated) with Atlas Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Atlas Insurance has no effect on the direction of Lotte Chemical i.e., Lotte Chemical and Atlas Insurance go up and down completely randomly.

Pair Corralation between Lotte Chemical and Atlas Insurance

Assuming the 90 days trading horizon Lotte Chemical Pakistan is expected to under-perform the Atlas Insurance. In addition to that, Lotte Chemical is 1.35 times more volatile than Atlas Insurance. It trades about 0.0 of its total potential returns per unit of risk. Atlas Insurance is currently generating about 0.13 per unit of volatility. If you would invest  3,260  in Atlas Insurance on September 28, 2024 and sell it today you would earn a total of  2,540  from holding Atlas Insurance or generate 77.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	93.52%
Values	Daily Returns

Lotte Chemical Pakistan  vs.  Atlas Insurance

Lotte Chemical Pakistan

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lotte Chemical Pakistan are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very weak technical indicators, Lotte Chemical displayed solid returns over the last few months and may actually be approaching a breakup point.

Atlas Insurance

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Atlas Insurance are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting basic indicators, Atlas Insurance sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lotte Chemical and Atlas Insurance

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

The idea behind Lotte Chemical Pakistan and Atlas Insurance 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.