Correlation Between Lotte Chemical and Central Omega

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

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

Diversification Opportunities for Lotte Chemical and Central Omega

-0.39

Correlation Coefficient

Lotte Chemical  Central Omega

Very good diversification

The 3 months correlation between Lotte and Central is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Lotte Chemical Titan and Central Omega Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Central Omega Resources 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 Titan are associated (or correlated) with Central Omega. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Central Omega Resources has no effect on the direction of Lotte Chemical i.e., Lotte Chemical and Central Omega go up and down completely randomly.

Pair Corralation between Lotte Chemical and Central Omega

Assuming the 90 days trading horizon Lotte Chemical Titan is expected to under-perform the Central Omega. But the stock apears to be less risky and, when comparing its historical volatility, Lotte Chemical Titan is 3.81 times less risky than Central Omega. The stock trades about 0.0 of its potential returns per unit of risk. The Central Omega Resources is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  11,400  in Central Omega Resources on September 26, 2024 and sell it today you would earn a total of  8,600  from holding Central Omega Resources or generate 75.44% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Lotte Chemical Titan  vs.  Central Omega Resources

Lotte Chemical Titan

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lotte Chemical Titan has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Lotte Chemical is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Central Omega Resources

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Central Omega Resources are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Central Omega disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lotte Chemical and Central Omega

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

The idea behind Lotte Chemical Titan and Central Omega Resources 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..