Correlation Between Dongkuk Steel and Lotte Fine
Can any of the company-specific risk be diversified away by investing in both Dongkuk Steel and Lotte Fine 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 Dongkuk Steel and Lotte Fine into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dongkuk Steel Mill and Lotte Fine Chemical, you can compare the effects of market volatilities on Dongkuk Steel and Lotte Fine 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 Dongkuk Steel with a short position of Lotte Fine. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dongkuk Steel and Lotte Fine.
Diversification Opportunities for Dongkuk Steel and Lotte Fine
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Dongkuk and Lotte is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Dongkuk Steel Mill and Lotte Fine Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lotte Fine Chemical and Dongkuk Steel 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 Dongkuk Steel Mill are associated (or correlated) with Lotte Fine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lotte Fine Chemical has no effect on the direction of Dongkuk Steel i.e., Dongkuk Steel and Lotte Fine go up and down completely randomly.
Pair Corralation between Dongkuk Steel and Lotte Fine
Assuming the 90 days trading horizon Dongkuk Steel Mill is expected to generate 15.29 times more return on investment than Lotte Fine. However, Dongkuk Steel is 15.29 times more volatile than Lotte Fine Chemical. It trades about 0.04 of its potential returns per unit of risk. Lotte Fine Chemical is currently generating about -0.03 per unit of risk. If you would invest 672,613 in Dongkuk Steel Mill on September 17, 2024 and sell it today you would earn a total of 77,387 from holding Dongkuk Steel Mill or generate 11.51% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Dongkuk Steel Mill vs. Lotte Fine Chemical
Performance |
Timeline |
Dongkuk Steel Mill |
Lotte Fine Chemical |
Dongkuk Steel and Lotte Fine Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Dongkuk Steel and Lotte Fine
The main advantage of trading using opposite Dongkuk Steel and Lotte Fine positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dongkuk Steel position performs unexpectedly, Lotte Fine 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 Fine will offset losses from the drop in Lotte Fine's long position.Dongkuk Steel vs. LG Chemicals | Dongkuk Steel vs. POSCO Holdings | Dongkuk Steel vs. Hanwha Solutions | Dongkuk Steel vs. Lotte Chemical Corp |
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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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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