Correlation Between Daedong Metals and LG Chemicals
Can any of the company-specific risk be diversified away by investing in both Daedong Metals 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 Daedong Metals and LG Chemicals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Daedong Metals Co and LG Chemicals, you can compare the effects of market volatilities on Daedong Metals 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 Daedong Metals with a short position of LG Chemicals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Daedong Metals and LG Chemicals.
Diversification Opportunities for Daedong Metals and LG Chemicals
-0.05 | Correlation Coefficient |
Good diversification
The 3 months correlation between Daedong and 051910 is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Daedong Metals Co and LG Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LG Chemicals and Daedong Metals 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 Daedong Metals Co 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 Daedong Metals i.e., Daedong Metals and LG Chemicals go up and down completely randomly.
Pair Corralation between Daedong Metals and LG Chemicals
Assuming the 90 days trading horizon Daedong Metals Co is expected to generate 1.48 times more return on investment than LG Chemicals. However, Daedong Metals is 1.48 times more volatile than LG Chemicals. It trades about -0.01 of its potential returns per unit of risk. LG Chemicals is currently generating about -0.06 per unit of risk. If you would invest 834,000 in Daedong Metals Co on September 2, 2024 and sell it today you would lose (92,000) from holding Daedong Metals Co or give up 11.03% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Daedong Metals Co vs. LG Chemicals
Performance |
| Timeline |
| Daedong Metals |
| LG Chemicals |
Daedong Metals and LG Chemicals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Daedong Metals and LG Chemicals
The main advantage of trading using opposite Daedong Metals and LG Chemicals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Daedong Metals 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.The idea behind Daedong Metals Co and LG Chemicals 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.| LG Chemicals vs. POSCO Holdings | LG Chemicals vs. Hanwha Solutions | LG Chemicals vs. Hyundai Steel | LG Chemicals vs. Ecopro 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
Other Complementary Tools
| Financial Widgets Easily integrated Macroaxis content with over 30 different plug-and-play financial widgets | |
| Equity Valuation Check real value of public entities based on technical and fundamental data | |
| Sync Your Broker Sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors. | |
| Economic Indicators Top statistical indicators that provide insights into how an economy is performing | |
| Instant Ratings Determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance |