Correlation Between Lotte Data and RFTech

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

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

Diversification Opportunities for Lotte Data and RFTech

-0.63

Correlation Coefficient

Lotte Data  RFTech

Excellent diversification

The 3 months correlation between Lotte and RFTech is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Lotte Data Communication and RFTech Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RFTech and Lotte Data 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 Data Communication are associated (or correlated) with RFTech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RFTech has no effect on the direction of Lotte Data i.e., Lotte Data and RFTech go up and down completely randomly.

Pair Corralation between Lotte Data and RFTech

Assuming the 90 days trading horizon Lotte Data Communication is expected to under-perform the RFTech. In addition to that, Lotte Data is 1.02 times more volatile than RFTech Co. It trades about -0.12 of its total potential returns per unit of risk. RFTech Co is currently generating about 0.16 per unit of volatility. If you would invest  316,000  in RFTech Co on September 21, 2024 and sell it today you would earn a total of  74,000  from holding RFTech Co or generate 23.42% return on investment over 90 days.

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

Lotte Data Communication  vs.  RFTech Co

Lotte Data Communication

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lotte Data Communication 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.

RFTech

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in RFTech Co are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, RFTech sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lotte Data and RFTech

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

The idea behind Lotte Data Communication and RFTech 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.