Correlation Between SH Energy and LG Chemicals
Can any of the company-specific risk be diversified away by investing in both SH Energy and LG Chemicals 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 SH Energy and LG Chemicals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SH Energy Chemical and LG Chemicals, you can compare the effects of market volatilities on SH Energy and LG Chemicals 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 SH Energy with a short position of LG Chemicals. Check out your portfolio center. Please also check ongoing floating volatility patterns of SH Energy and LG Chemicals.
Diversification Opportunities for SH Energy and LG Chemicals
-0.04 | Correlation Coefficient |
Good diversification
The 3 months correlation between 002360 and 051910 is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding SH Energy Chemical and LG Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LG Chemicals and SH Energy 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 SH Energy Chemical are associated (or correlated) with LG Chemicals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LG Chemicals has no effect on the direction of SH Energy i.e., SH Energy and LG Chemicals go up and down completely randomly.
Pair Corralation between SH Energy and LG Chemicals
Assuming the 90 days trading horizon SH Energy Chemical is expected to generate 1.08 times more return on investment than LG Chemicals. However, SH Energy is 1.08 times more volatile than LG Chemicals. It trades about -0.02 of its potential returns per unit of risk. LG Chemicals is currently generating about -0.08 per unit of risk. If you would invest 79,138 in SH Energy Chemical on August 31, 2024 and sell it today you would lose (24,738) from holding SH Energy Chemical or give up 31.26% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
SH Energy Chemical vs. LG Chemicals
Performance |
| Timeline |
| SH Energy Chemical |
| LG Chemicals |
SH Energy and LG Chemicals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SH Energy and LG Chemicals
The main advantage of trading using opposite SH Energy and LG Chemicals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SH Energy position performs unexpectedly, LG Chemicals 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 LG Chemicals will offset losses from the drop in LG Chemicals' long position.| SH Energy vs. AptaBio Therapeutics | SH Energy vs. Daewoo SBI SPAC | SH Energy vs. Dream Security co | SH Energy vs. Microfriend |
| LG Chemicals vs. Orbitech Co | LG Chemicals vs. Shinsung Delta Tech | LG Chemicals vs. Sungchang Autotech Co | LG Chemicals vs. ECSTELECOM Co |
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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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