Correlation Between Lotte Chemical and Trias Sentosa

Can any of the company-specific risk be diversified away by investing in both Lotte Chemical and Trias Sentosa 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 Trias Sentosa 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 Trias Sentosa Tbk, you can compare the effects of market volatilities on Lotte Chemical and Trias Sentosa 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 Trias Sentosa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lotte Chemical and Trias Sentosa.

Diversification Opportunities for Lotte Chemical and Trias Sentosa

-0.42

Correlation Coefficient

Lotte Chemical  Trias Sentosa

Very good diversification

The 3 months correlation between Lotte and Trias is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Lotte Chemical Titan and Trias Sentosa Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Trias Sentosa 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 Trias Sentosa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Trias Sentosa Tbk has no effect on the direction of Lotte Chemical i.e., Lotte Chemical and Trias Sentosa go up and down completely randomly.

Pair Corralation between Lotte Chemical and Trias Sentosa

Assuming the 90 days trading horizon Lotte Chemical Titan is expected to generate 0.78 times more return on investment than Trias Sentosa. However, Lotte Chemical Titan is 1.28 times less risky than Trias Sentosa. It trades about 0.0 of its potential returns per unit of risk. Trias Sentosa Tbk is currently generating about -0.02 per unit of risk. If you would invest  21,600  in Lotte Chemical Titan on September 22, 2024 and sell it today you would lose (2,600) from holding Lotte Chemical Titan or give up 12.04% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.79%
Values	Daily Returns

Lotte Chemical Titan  vs.  Trias Sentosa Tbk

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.

Trias Sentosa Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Lotte Chemical and Trias Sentosa

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

The idea behind Lotte Chemical Titan and Trias Sentosa Tbk 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.