Correlation Between Automobile and LG Chemicals
Can any of the company-specific risk be diversified away by investing in both Automobile 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 Automobile and LG Chemicals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Automobile Pc and LG Chemicals, you can compare the effects of market volatilities on Automobile 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 Automobile with a short position of LG Chemicals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Automobile and LG Chemicals.
Diversification Opportunities for Automobile and LG Chemicals
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Automobile and 051910 is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Automobile Pc and LG Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LG Chemicals and Automobile 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 Automobile Pc 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 Automobile i.e., Automobile and LG Chemicals go up and down completely randomly.
Pair Corralation between Automobile and LG Chemicals
Assuming the 90 days trading horizon Automobile Pc is expected to under-perform the LG Chemicals. In addition to that, Automobile is 1.18 times more volatile than LG Chemicals. It trades about -0.11 of its total potential returns per unit of risk. LG Chemicals is currently generating about -0.09 per unit of volatility. If you would invest 39,100,000 in LG Chemicals on October 25, 2024 and sell it today you would lose (14,500,000) from holding LG Chemicals or give up 37.08% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Automobile Pc vs. LG Chemicals
Performance |
| Timeline |
| Automobile Pc |
| LG Chemicals |
Automobile and LG Chemicals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Automobile and LG Chemicals
The main advantage of trading using opposite Automobile and LG Chemicals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Automobile 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.| Automobile vs. Sajo Seafood | Automobile vs. Duksan Hi Metal | Automobile vs. DONGKUK TED METAL | Automobile vs. FOODWELL Co |
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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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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