Correlation Between Songwon Industrial and LG Chemicals
Can any of the company-specific risk be diversified away by investing in both Songwon Industrial 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 Songwon Industrial and LG Chemicals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Songwon Industrial Co and LG Chemicals, you can compare the effects of market volatilities on Songwon Industrial 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 Songwon Industrial with a short position of LG Chemicals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Songwon Industrial and LG Chemicals.
Diversification Opportunities for Songwon Industrial and LG Chemicals
0.56 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Songwon and 051910 is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Songwon Industrial Co and LG Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LG Chemicals and Songwon Industrial 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 Songwon Industrial 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 Songwon Industrial i.e., Songwon Industrial and LG Chemicals go up and down completely randomly.
Pair Corralation between Songwon Industrial and LG Chemicals
Assuming the 90 days trading horizon Songwon Industrial Co is expected to generate 1.01 times more return on investment than LG Chemicals. However, Songwon Industrial is 1.01 times more volatile than LG Chemicals. It trades about -0.06 of its potential returns per unit of risk. LG Chemicals is currently generating about -0.1 per unit of risk. If you would invest 1,979,247 in Songwon Industrial Co on September 1, 2024 and sell it today you would lose (932,247) from holding Songwon Industrial Co or give up 47.1% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Songwon Industrial Co vs. LG Chemicals
Performance |
| Timeline |
| Songwon Industrial |
| LG Chemicals |
Songwon Industrial and LG Chemicals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Songwon Industrial and LG Chemicals
The main advantage of trading using opposite Songwon Industrial and LG Chemicals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Songwon Industrial 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.| Songwon Industrial vs. AptaBio Therapeutics | Songwon Industrial vs. Daewoo SBI SPAC | Songwon Industrial vs. Dream Security co | Songwon Industrial vs. Microfriend |
| LG Chemicals vs. Korea Investment Holdings | LG Chemicals vs. INNOX Advanced Materials | LG Chemicals vs. Union Materials Corp | LG Chemicals vs. DB Financial Investment |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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