Correlation Between Daewon Chemical and LG Electronics
Can any of the company-specific risk be diversified away by investing in both Daewon Chemical and LG Electronics 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 Daewon Chemical and LG Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Daewon Chemical Co and LG Electronics, you can compare the effects of market volatilities on Daewon Chemical and LG Electronics 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 Daewon Chemical with a short position of LG Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Daewon Chemical and LG Electronics.
Diversification Opportunities for Daewon Chemical and LG Electronics
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Daewon and 066570 is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Daewon Chemical Co and LG Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LG Electronics and Daewon Chemical 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 Daewon Chemical Co are associated (or correlated) with LG Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LG Electronics has no effect on the direction of Daewon Chemical i.e., Daewon Chemical and LG Electronics go up and down completely randomly.
Pair Corralation between Daewon Chemical and LG Electronics
Assuming the 90 days trading horizon Daewon Chemical Co is expected to under-perform the LG Electronics. In addition to that, Daewon Chemical is 1.7 times more volatile than LG Electronics. It trades about -0.03 of its total potential returns per unit of risk. LG Electronics is currently generating about 0.01 per unit of volatility. If you would invest 8,798,972 in LG Electronics on September 1, 2024 and sell it today you would earn a total of 171,028 from holding LG Electronics or generate 1.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.79% |
| Values | Daily Returns |
Daewon Chemical Co vs. LG Electronics
Performance |
| Timeline |
| Daewon Chemical |
| LG Electronics |
Daewon Chemical and LG Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Daewon Chemical and LG Electronics
The main advantage of trading using opposite Daewon Chemical and LG Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Daewon Chemical position performs unexpectedly, LG Electronics 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 Electronics will offset losses from the drop in LG Electronics' long position.| Daewon Chemical vs. LG Electronics | Daewon Chemical vs. Daedong Metals Co | Daewon Chemical vs. Choil Aluminum | Daewon Chemical vs. Samji Electronics Co |
| LG Electronics vs. AptaBio Therapeutics | LG Electronics vs. Daewoo SBI SPAC | LG Electronics vs. Dream Security co | LG Electronics vs. Microfriend |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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