Correlation Between Lotte Non-Life and Seoul Semiconductor

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

By analyzing existing cross correlation between Lotte Non Life Insurance and Seoul Semiconductor Co, you can compare the effects of market volatilities on Lotte Non-Life and Seoul Semiconductor 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 Non-Life with a short position of Seoul Semiconductor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lotte Non-Life and Seoul Semiconductor.

Diversification Opportunities for Lotte Non-Life and Seoul Semiconductor

0.73

Correlation Coefficient

Lotte Non-Life  Seoul Semiconductor

Poor diversification

The 3 months correlation between Lotte and Seoul is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Lotte Non Life Insurance and Seoul Semiconductor Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Seoul Semiconductor and Lotte Non-Life 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 Non Life Insurance are associated (or correlated) with Seoul Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Seoul Semiconductor has no effect on the direction of Lotte Non-Life i.e., Lotte Non-Life and Seoul Semiconductor go up and down completely randomly.

Pair Corralation between Lotte Non-Life and Seoul Semiconductor

Assuming the 90 days trading horizon Lotte Non Life Insurance is expected to under-perform the Seoul Semiconductor. But the stock apears to be less risky and, when comparing its historical volatility, Lotte Non Life Insurance is 1.2 times less risky than Seoul Semiconductor. The stock trades about -0.14 of its potential returns per unit of risk. The Seoul Semiconductor Co is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  846,000  in Seoul Semiconductor Co on September 22, 2024 and sell it today you would lose (127,000) from holding Seoul Semiconductor Co or give up 15.01% of portfolio value over 90 days.

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

Lotte Non Life Insurance  vs.  Seoul Semiconductor Co

Lotte Non Life

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lotte Non Life Insurance 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.

Seoul Semiconductor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Seoul Semiconductor Co 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 Non-Life and Seoul Semiconductor

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

The idea behind Lotte Non Life Insurance and Seoul Semiconductor Co 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.