Correlation Between National Plastic and LG Chemicals
Can any of the company-specific risk be diversified away by investing in both National Plastic 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 National Plastic and LG Chemicals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between National Plastic Co and LG Chemicals, you can compare the effects of market volatilities on National Plastic 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 National Plastic with a short position of LG Chemicals. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Plastic and LG Chemicals.
Diversification Opportunities for National Plastic and LG Chemicals
0.46 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between National and 051910 is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding National Plastic Co and LG Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LG Chemicals and National Plastic 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 National Plastic Co 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 National Plastic i.e., National Plastic and LG Chemicals go up and down completely randomly.
Pair Corralation between National Plastic and LG Chemicals
Assuming the 90 days trading horizon National Plastic Co is expected to generate 0.6 times more return on investment than LG Chemicals. However, National Plastic Co is 1.67 times less risky than LG Chemicals. It trades about -0.03 of its potential returns per unit of risk. LG Chemicals is currently generating about -0.06 per unit of risk. If you would invest 344,600 in National Plastic Co on August 27, 2024 and sell it today you would lose (86,100) from holding National Plastic Co or give up 24.99% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
National Plastic Co vs. LG Chemicals
Performance |
| Timeline |
| National Plastic |
| LG Chemicals |
National Plastic and LG Chemicals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with National Plastic and LG Chemicals
The main advantage of trading using opposite National Plastic and LG Chemicals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Plastic 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.| National Plastic vs. Daiyang Metal Co | National Plastic vs. Heungkuk Metaltech CoLtd | National Plastic vs. ITM Semiconductor Co | National Plastic vs. Jin Air Co |
| LG Chemicals vs. National Plastic Co | LG Chemicals vs. Korea Petro Chemical | LG Chemicals vs. Ssangyong Materials Corp | LG Chemicals vs. INNOX Advanced Materials |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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