Correlation Between Lotte Energy and ENERGYMACHINERY KOREA
Can any of the company-specific risk be diversified away by investing in both Lotte Energy and ENERGYMACHINERY KOREA 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 Energy and ENERGYMACHINERY KOREA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lotte Energy Materials and ENERGYMACHINERY KOREA CoLtd, you can compare the effects of market volatilities on Lotte Energy and ENERGYMACHINERY KOREA 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 Energy with a short position of ENERGYMACHINERY KOREA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lotte Energy and ENERGYMACHINERY KOREA.
Diversification Opportunities for Lotte Energy and ENERGYMACHINERY KOREA
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Lotte and ENERGYMACHINERY is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Lotte Energy Materials and ENERGYMACHINERY KOREA CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ENERGYMACHINERY KOREA and Lotte Energy 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 Energy Materials are associated (or correlated) with ENERGYMACHINERY KOREA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ENERGYMACHINERY KOREA has no effect on the direction of Lotte Energy i.e., Lotte Energy and ENERGYMACHINERY KOREA go up and down completely randomly.
Pair Corralation between Lotte Energy and ENERGYMACHINERY KOREA
Assuming the 90 days trading horizon Lotte Energy Materials is expected to under-perform the ENERGYMACHINERY KOREA. In addition to that, Lotte Energy is 1.13 times more volatile than ENERGYMACHINERY KOREA CoLtd. It trades about -0.19 of its total potential returns per unit of risk. ENERGYMACHINERY KOREA CoLtd is currently generating about 0.06 per unit of volatility. If you would invest 210,500 in ENERGYMACHINERY KOREA CoLtd on September 25, 2024 and sell it today you would earn a total of 19,000 from holding ENERGYMACHINERY KOREA CoLtd or generate 9.03% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Lotte Energy Materials vs. ENERGYMACHINERY KOREA CoLtd
Performance |
Timeline |
Lotte Energy Materials |
ENERGYMACHINERY KOREA |
Lotte Energy and ENERGYMACHINERY KOREA Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Lotte Energy and ENERGYMACHINERY KOREA
The main advantage of trading using opposite Lotte Energy and ENERGYMACHINERY KOREA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lotte Energy position performs unexpectedly, ENERGYMACHINERY KOREA 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 ENERGYMACHINERY KOREA will offset losses from the drop in ENERGYMACHINERY KOREA's long position.Lotte Energy vs. Dongsin Engineering Construction | Lotte Energy vs. Doosan Fuel Cell | Lotte Energy vs. Daishin Balance 1 | Lotte Energy vs. Total Soft Bank |
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Check out your portfolio center.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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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