Correlation Between CJ Seafood and LS Materials
Can any of the company-specific risk be diversified away by investing in both CJ Seafood and LS Materials 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 CJ Seafood and LS Materials into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CJ Seafood Corp and LS Materials, you can compare the effects of market volatilities on CJ Seafood and LS Materials 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 CJ Seafood with a short position of LS Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of CJ Seafood and LS Materials.
Diversification Opportunities for CJ Seafood and LS Materials
0.56 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between 011150 and 417200 is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding CJ Seafood Corp and LS Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LS Materials and CJ Seafood 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 CJ Seafood Corp are associated (or correlated) with LS Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LS Materials has no effect on the direction of CJ Seafood i.e., CJ Seafood and LS Materials go up and down completely randomly.
Pair Corralation between CJ Seafood and LS Materials
Assuming the 90 days trading horizon CJ Seafood Corp is expected to under-perform the LS Materials. But the stock apears to be less risky and, when comparing its historical volatility, CJ Seafood Corp is 3.4 times less risky than LS Materials. The stock trades about -0.02 of its potential returns per unit of risk. The LS Materials is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 1,222,000 in LS Materials on November 7, 2024 and sell it today you would earn a total of 103,000 from holding LS Materials or generate 8.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
CJ Seafood Corp vs. LS Materials
Performance |
| Timeline |
| CJ Seafood Corp |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| LS Materials |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
CJ Seafood and LS Materials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CJ Seafood and LS Materials
The main advantage of trading using opposite CJ Seafood and LS Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CJ Seafood position performs unexpectedly, LS Materials 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 LS Materials will offset losses from the drop in LS Materials' long position.The idea behind CJ Seafood Corp and LS Materials pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| LS Materials vs. Samsung Electronics Co | LS Materials vs. SK Hynix | LS Materials vs. LG Chem | LS Materials vs. Samsung SDI |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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