Correlation Between Kumho Petro and LG Chemicals
Can any of the company-specific risk be diversified away by investing in both Kumho Petro 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 Kumho Petro and LG Chemicals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Kumho Petro Chemical and LG Chemicals, you can compare the effects of market volatilities on Kumho Petro 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 Kumho Petro with a short position of LG Chemicals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kumho Petro and LG Chemicals.
Diversification Opportunities for Kumho Petro and LG Chemicals
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Kumho and 051910 is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Kumho Petro Chemical and LG Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LG Chemicals and Kumho Petro 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 Kumho Petro Chemical 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 Kumho Petro i.e., Kumho Petro and LG Chemicals go up and down completely randomly.
Pair Corralation between Kumho Petro and LG Chemicals
Assuming the 90 days trading horizon Kumho Petro Chemical is expected to generate 1.09 times more return on investment than LG Chemicals. However, Kumho Petro is 1.09 times more volatile than LG Chemicals. It trades about 0.0 of its potential returns per unit of risk. LG Chemicals is currently generating about -0.06 per unit of risk. If you would invest 13,374,400 in Kumho Petro Chemical on August 27, 2024 and sell it today you would lose (2,724,400) from holding Kumho Petro Chemical or give up 20.37% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Kumho Petro Chemical vs. LG Chemicals
Performance |
| Timeline |
| Kumho Petro Chemical |
| LG Chemicals |
Kumho Petro and LG Chemicals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Kumho Petro and LG Chemicals
The main advantage of trading using opposite Kumho Petro and LG Chemicals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kumho Petro 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.| Kumho Petro vs. LG Chemicals | Kumho Petro vs. Lotte Chemical Corp | Kumho Petro vs. Hyundai Steel | Kumho Petro vs. Seah Steel Corp |
| LG Chemicals vs. Cloud Air CoLtd | LG Chemicals vs. Iljin Display | LG Chemicals vs. Kakao Games Corp | LG Chemicals vs. Tway Air Co |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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