Correlation Between Lotte Chemical and Petrosea Tbk
Can any of the company-specific risk be diversified away by investing in both Lotte Chemical and Petrosea Tbk 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 Petrosea Tbk 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 Petrosea Tbk, you can compare the effects of market volatilities on Lotte Chemical and Petrosea Tbk 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 Petrosea Tbk. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lotte Chemical and Petrosea Tbk.
Diversification Opportunities for Lotte Chemical and Petrosea Tbk
-0.6 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Lotte and Petrosea is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Lotte Chemical Titan and Petrosea Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Petrosea Tbk 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 Petrosea Tbk. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Petrosea Tbk has no effect on the direction of Lotte Chemical i.e., Lotte Chemical and Petrosea Tbk go up and down completely randomly.
Pair Corralation between Lotte Chemical and Petrosea Tbk
Assuming the 90 days trading horizon Lotte Chemical Titan is expected to under-perform the Petrosea Tbk. But the stock apears to be less risky and, when comparing its historical volatility, Lotte Chemical Titan is 2.5 times less risky than Petrosea Tbk. The stock trades about -0.02 of its potential returns per unit of risk. The Petrosea Tbk is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest 1,420,000 in Petrosea Tbk on September 25, 2024 and sell it today you would earn a total of 1,385,000 from holding Petrosea Tbk or generate 97.54% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Weak |
Accuracy | 98.44% |
Values | Daily Returns |
Lotte Chemical Titan vs. Petrosea Tbk
Performance |
Timeline |
Lotte Chemical Titan |
Petrosea Tbk |
Lotte Chemical and Petrosea Tbk Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Lotte Chemical and Petrosea Tbk
The main advantage of trading using opposite Lotte Chemical and Petrosea Tbk positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lotte Chemical position performs unexpectedly, Petrosea Tbk 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 Petrosea Tbk will offset losses from the drop in Petrosea Tbk's long position.Lotte Chemical vs. Intanwijaya Internasional Tbk | Lotte Chemical vs. Asiaplast Industries Tbk | Lotte Chemical vs. Trias Sentosa Tbk |
Petrosea Tbk vs. Intanwijaya Internasional Tbk | Petrosea Tbk vs. Asiaplast Industries Tbk | Petrosea Tbk vs. Trias Sentosa Tbk | Petrosea Tbk 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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