Correlation Between LS Materials and Lotte Data

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

By analyzing existing cross correlation between LS Materials and Lotte Data Communication, you can compare the effects of market volatilities on LS Materials and Lotte Data 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 LS Materials with a short position of Lotte Data. Check out your portfolio center. Please also check ongoing floating volatility patterns of LS Materials and Lotte Data.

Diversification Opportunities for LS Materials and Lotte Data

-0.22

Correlation Coefficient

LS Materials  Lotte Data

Very good diversification

The 3 months correlation between 417200 and Lotte is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding LS Materials and Lotte Data Communication in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lotte Data Communication and LS Materials 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 LS Materials are associated (or correlated) with Lotte Data. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lotte Data Communication has no effect on the direction of LS Materials i.e., LS Materials and Lotte Data go up and down completely randomly.

Pair Corralation between LS Materials and Lotte Data

Assuming the 90 days trading horizon LS Materials is expected to generate 1.55 times more return on investment than Lotte Data. However, LS Materials is 1.55 times more volatile than Lotte Data Communication. It trades about 0.08 of its potential returns per unit of risk. Lotte Data Communication is currently generating about -0.2 per unit of risk. If you would invest  2,552,653  in LS Materials on March 4, 2024 and sell it today you would earn a total of  387,347  from holding LS Materials or generate 15.17% return on investment over 90 days.

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

LS Materials  vs.  Lotte Data Communication

LS Materials

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in LS Materials are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, LS Materials sustained solid returns over the last few months and may actually be approaching a breakup point.

Lotte Data Communication

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lotte Data Communication has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in July 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with LS Materials and Lotte Data

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

The idea behind LS Materials and Lotte Data Communication 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.