Correlation Between Hannong Chemicals and LG Energy
Can any of the company-specific risk be diversified away by investing in both Hannong Chemicals and LG Energy 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 Hannong Chemicals and LG Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hannong Chemicals and LG Energy Solution, you can compare the effects of market volatilities on Hannong Chemicals and LG Energy 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 Hannong Chemicals with a short position of LG Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hannong Chemicals and LG Energy.
Diversification Opportunities for Hannong Chemicals and LG Energy
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Hannong and 373220 is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Hannong Chemicals and LG Energy Solution in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LG Energy Solution and Hannong Chemicals 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 Hannong Chemicals are associated (or correlated) with LG Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LG Energy Solution has no effect on the direction of Hannong Chemicals i.e., Hannong Chemicals and LG Energy go up and down completely randomly.
Pair Corralation between Hannong Chemicals and LG Energy
Assuming the 90 days trading horizon Hannong Chemicals is expected to generate 1.51 times more return on investment than LG Energy. However, Hannong Chemicals is 1.51 times more volatile than LG Energy Solution. It trades about -0.07 of its potential returns per unit of risk. LG Energy Solution is currently generating about -0.17 per unit of risk. If you would invest 1,395,306 in Hannong Chemicals on September 30, 2024 and sell it today you would lose (87,306) from holding Hannong Chemicals or give up 6.26% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Hannong Chemicals vs. LG Energy Solution
Performance |
Timeline |
Hannong Chemicals |
LG Energy Solution |
Hannong Chemicals and LG Energy Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Hannong Chemicals and LG Energy
The main advantage of trading using opposite Hannong Chemicals and LG Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hannong Chemicals position performs unexpectedly, LG Energy 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 Energy will offset losses from the drop in LG Energy's long position.Hannong Chemicals vs. Seoul Food Industrial | Hannong Chemicals vs. CKH Food Health | Hannong Chemicals vs. Jeju Beer Co | Hannong Chemicals vs. LB Investment |
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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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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