Correlation Between Youl Chon and Lotte Non-Life

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

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

Diversification Opportunities for Youl Chon and Lotte Non-Life

0.46

Correlation Coefficient

Youl Chon  Lotte Non-Life

Very weak diversification

The 3 months correlation between Youl and Lotte is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Youl Chon Chemical and Lotte Non Life Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lotte Non Life and Youl Chon 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 Youl Chon Chemical are associated (or correlated) with Lotte Non-Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lotte Non Life has no effect on the direction of Youl Chon i.e., Youl Chon and Lotte Non-Life go up and down completely randomly.

Pair Corralation between Youl Chon and Lotte Non-Life

Assuming the 90 days trading horizon Youl Chon Chemical is expected to under-perform the Lotte Non-Life. In addition to that, Youl Chon is 1.17 times more volatile than Lotte Non Life Insurance. It trades about -0.22 of its total potential returns per unit of risk. Lotte Non Life Insurance is currently generating about 0.0 per unit of volatility. If you would invest  205,000  in Lotte Non Life Insurance on September 29, 2024 and sell it today you would lose (2,000) from holding Lotte Non Life Insurance or give up 0.98% of portfolio value over 90 days.

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

Youl Chon Chemical  vs.  Lotte Non Life Insurance

Youl Chon Chemical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Youl Chon Chemical has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Youl Chon is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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.

Pair Trading with Youl Chon and Lotte Non-Life

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

The idea behind Youl Chon Chemical and Lotte Non Life 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.