Correlation Between Chorokbaem Healthcare and Lotte Chilsung

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

By analyzing existing cross correlation between Chorokbaem Healthcare Co and Lotte Chilsung Beverage, you can compare the effects of market volatilities on Chorokbaem Healthcare and Lotte Chilsung 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 Chorokbaem Healthcare with a short position of Lotte Chilsung. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chorokbaem Healthcare and Lotte Chilsung.

Diversification Opportunities for Chorokbaem Healthcare and Lotte Chilsung

-0.2

Correlation Coefficient

Chorokbaem Healthcare  Lotte Chilsung

Good diversification

The 3 months correlation between Chorokbaem and Lotte is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Chorokbaem Healthcare Co and Lotte Chilsung Beverage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lotte Chilsung Beverage and Chorokbaem Healthcare 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 Chorokbaem Healthcare Co are associated (or correlated) with Lotte Chilsung. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lotte Chilsung Beverage has no effect on the direction of Chorokbaem Healthcare i.e., Chorokbaem Healthcare and Lotte Chilsung go up and down completely randomly.

Pair Corralation between Chorokbaem Healthcare and Lotte Chilsung

Assuming the 90 days trading horizon Chorokbaem Healthcare Co is expected to under-perform the Lotte Chilsung. In addition to that, Chorokbaem Healthcare is 1.75 times more volatile than Lotte Chilsung Beverage. It trades about -0.04 of its total potential returns per unit of risk. Lotte Chilsung Beverage is currently generating about -0.03 per unit of volatility. If you would invest  17,874,500  in Lotte Chilsung Beverage on February 13, 2024 and sell it today you would lose (4,854,500) from holding Lotte Chilsung Beverage or give up 27.16% of portfolio value over 90 days.

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

Chorokbaem Healthcare Co  vs.  Lotte Chilsung Beverage

Chorokbaem Healthcare

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Chorokbaem Healthcare Co are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Chorokbaem Healthcare sustained solid returns over the last few months and may actually be approaching a breakup point.

Lotte Chilsung Beverage

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Lotte Chilsung Beverage are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Lotte Chilsung is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Chorokbaem Healthcare and Lotte Chilsung

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

The idea behind Chorokbaem Healthcare Co and Lotte Chilsung Beverage 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.