Correlation Between Samsung SDI and LG Chemicals
Can any of the company-specific risk be diversified away by investing in both Samsung SDI 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 Samsung SDI and LG Chemicals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Samsung SDI and LG Chemicals, you can compare the effects of market volatilities on Samsung SDI 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 Samsung SDI with a short position of LG Chemicals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Samsung SDI and LG Chemicals.
Diversification Opportunities for Samsung SDI and LG Chemicals
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Samsung and 051910 is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Samsung SDI and LG Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LG Chemicals and Samsung SDI 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 Samsung SDI 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 Samsung SDI i.e., Samsung SDI and LG Chemicals go up and down completely randomly.
Pair Corralation between Samsung SDI and LG Chemicals
Assuming the 90 days trading horizon Samsung SDI is expected to under-perform the LG Chemicals. In addition to that, Samsung SDI is 1.33 times more volatile than LG Chemicals. It trades about -0.24 of its total potential returns per unit of risk. LG Chemicals is currently generating about -0.15 per unit of volatility. If you would invest 35,750,000 in LG Chemicals on August 28, 2024 and sell it today you would lose (5,050,000) from holding LG Chemicals or give up 14.13% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Samsung SDI vs. LG Chemicals
Performance |
| Timeline |
| Samsung SDI |
| LG Chemicals |
Samsung SDI and LG Chemicals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Samsung SDI and LG Chemicals
The main advantage of trading using opposite Samsung SDI and LG Chemicals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Samsung SDI 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.| Samsung SDI vs. Korea Real Estate | Samsung SDI vs. Korea Ratings Co | Samsung SDI vs. IQuest Co | Samsung SDI vs. Wonbang Tech Co |
| LG Chemicals vs. Hyundai Industrial Co | LG Chemicals vs. Songwon Industrial Co | LG Chemicals vs. Daiyang Metal Co | LG Chemicals vs. Pungguk Ethanol Industrial |
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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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