Correlation Between Lotte Chemical and Gunawan Dianjaya
Can any of the company-specific risk be diversified away by investing in both Lotte Chemical and Gunawan Dianjaya 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 Gunawan Dianjaya 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 Gunawan Dianjaya Steel, you can compare the effects of market volatilities on Lotte Chemical and Gunawan Dianjaya 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 Gunawan Dianjaya. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lotte Chemical and Gunawan Dianjaya.
Diversification Opportunities for Lotte Chemical and Gunawan Dianjaya
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Lotte and Gunawan is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Lotte Chemical Titan and Gunawan Dianjaya Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gunawan Dianjaya Steel 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 Gunawan Dianjaya. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gunawan Dianjaya Steel has no effect on the direction of Lotte Chemical i.e., Lotte Chemical and Gunawan Dianjaya go up and down completely randomly.
Pair Corralation between Lotte Chemical and Gunawan Dianjaya
Assuming the 90 days trading horizon Lotte Chemical Titan is expected to generate 0.46 times more return on investment than Gunawan Dianjaya. However, Lotte Chemical Titan is 2.17 times less risky than Gunawan Dianjaya. It trades about -0.02 of its potential returns per unit of risk. Gunawan Dianjaya Steel is currently generating about -0.09 per unit of risk. If you would invest 19,400 in Lotte Chemical Titan on September 25, 2024 and sell it today you would lose (500.00) from holding Lotte Chemical Titan or give up 2.58% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Lotte Chemical Titan vs. Gunawan Dianjaya Steel
Performance |
Timeline |
Lotte Chemical Titan |
Gunawan Dianjaya Steel |
Lotte Chemical and Gunawan Dianjaya Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Lotte Chemical and Gunawan Dianjaya
The main advantage of trading using opposite Lotte Chemical and Gunawan Dianjaya positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lotte Chemical position performs unexpectedly, Gunawan Dianjaya 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 Gunawan Dianjaya will offset losses from the drop in Gunawan Dianjaya's long position.Lotte Chemical vs. Intanwijaya Internasional Tbk | Lotte Chemical vs. Asiaplast Industries Tbk | Lotte Chemical vs. Trias Sentosa Tbk |
Gunawan Dianjaya vs. Intanwijaya Internasional Tbk | Gunawan Dianjaya vs. Asiaplast Industries Tbk | Gunawan Dianjaya vs. Trias Sentosa Tbk | Gunawan Dianjaya vs. Lotte Chemical Titan |
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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