Correlation Between Trias Sentosa and Lotte Chemical

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

By analyzing existing cross correlation between Trias Sentosa Tbk and Lotte Chemical Titan, you can compare the effects of market volatilities on Trias Sentosa and Lotte Chemical 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 Trias Sentosa with a short position of Lotte Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Trias Sentosa and Lotte Chemical.

Diversification Opportunities for Trias Sentosa and Lotte Chemical

-0.47

Correlation Coefficient

Trias Sentosa  Lotte Chemical

Very good diversification

The 3 months correlation between Trias and Lotte is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Trias Sentosa Tbk and Lotte Chemical Titan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lotte Chemical Titan and Trias Sentosa 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 Trias Sentosa Tbk are associated (or correlated) with Lotte Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lotte Chemical Titan has no effect on the direction of Trias Sentosa i.e., Trias Sentosa and Lotte Chemical go up and down completely randomly.

Pair Corralation between Trias Sentosa and Lotte Chemical

Assuming the 90 days trading horizon Trias Sentosa Tbk is expected to under-perform the Lotte Chemical. But the stock apears to be less risky and, when comparing its historical volatility, Trias Sentosa Tbk is 1.05 times less risky than Lotte Chemical. The stock trades about -0.01 of its potential returns per unit of risk. The Lotte Chemical Titan is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  19,200  in Lotte Chemical Titan on September 26, 2024 and sell it today you would lose (200.00) from holding Lotte Chemical Titan or give up 1.04% of portfolio value over 90 days.

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

Trias Sentosa Tbk  vs.  Lotte Chemical Titan

Trias Sentosa Tbk

Risk-Adjusted Performance

0 of 100

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.

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.

Pair Trading with Trias Sentosa and Lotte Chemical

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

The idea behind Trias Sentosa Tbk and Lotte Chemical Titan 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.