Correlation Between SK Hynix and LegoChem Biosciences
Can any of the company-specific risk be diversified away by investing in both SK Hynix and LegoChem Biosciences 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 SK Hynix and LegoChem Biosciences into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SK Hynix and LegoChem Biosciences, you can compare the effects of market volatilities on SK Hynix and LegoChem Biosciences 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 SK Hynix with a short position of LegoChem Biosciences. Check out your portfolio center. Please also check ongoing floating volatility patterns of SK Hynix and LegoChem Biosciences.
Diversification Opportunities for SK Hynix and LegoChem Biosciences
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between 000660 and LegoChem is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding SK Hynix and LegoChem Biosciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LegoChem Biosciences and SK Hynix 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 SK Hynix are associated (or correlated) with LegoChem Biosciences. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LegoChem Biosciences has no effect on the direction of SK Hynix i.e., SK Hynix and LegoChem Biosciences go up and down completely randomly.
Pair Corralation between SK Hynix and LegoChem Biosciences
Assuming the 90 days trading horizon SK Hynix is expected to under-perform the LegoChem Biosciences. But the stock apears to be less risky and, when comparing its historical volatility, SK Hynix is 1.23 times less risky than LegoChem Biosciences. The stock trades about -0.01 of its potential returns per unit of risk. The LegoChem Biosciences is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 9,120,000 in LegoChem Biosciences on September 3, 2024 and sell it today you would earn a total of 430,000 from holding LegoChem Biosciences or generate 4.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
SK Hynix vs. LegoChem Biosciences
Performance |
| Timeline |
| SK Hynix |
| LegoChem Biosciences |
SK Hynix and LegoChem Biosciences Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SK Hynix and LegoChem Biosciences
The main advantage of trading using opposite SK Hynix and LegoChem Biosciences positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SK Hynix position performs unexpectedly, LegoChem Biosciences 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 LegoChem Biosciences will offset losses from the drop in LegoChem Biosciences' long position.| SK Hynix vs. Haitai Confectionery Foods | SK Hynix vs. Dongkuk Structures Construction | SK Hynix vs. Tuksu Engineering ConstructionLtd | SK Hynix vs. Camus Engineering Construction |
| LegoChem Biosciences vs. Dongnam Chemical Co | LegoChem Biosciences vs. Korea Petro Chemical | LegoChem Biosciences vs. TK Chemical | LegoChem Biosciences vs. Tae Kyung Chemical |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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