Correlation Between Seoul Electronics and LG Chemicals
Can any of the company-specific risk be diversified away by investing in both Seoul Electronics 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 Seoul Electronics and LG Chemicals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Seoul Electronics Telecom and LG Chemicals, you can compare the effects of market volatilities on Seoul Electronics 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 Seoul Electronics with a short position of LG Chemicals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Seoul Electronics and LG Chemicals.
Diversification Opportunities for Seoul Electronics and LG Chemicals
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Seoul and 051910 is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Seoul Electronics Telecom and LG Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LG Chemicals and Seoul Electronics 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 Seoul Electronics Telecom 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 Seoul Electronics i.e., Seoul Electronics and LG Chemicals go up and down completely randomly.
Pair Corralation between Seoul Electronics and LG Chemicals
Assuming the 90 days trading horizon Seoul Electronics Telecom is expected to generate 1.27 times more return on investment than LG Chemicals. However, Seoul Electronics is 1.27 times more volatile than LG Chemicals. It trades about 0.47 of its potential returns per unit of risk. LG Chemicals is currently generating about -0.13 per unit of risk. If you would invest 21,700 in Seoul Electronics Telecom on October 12, 2024 and sell it today you would earn a total of 5,200 from holding Seoul Electronics Telecom or generate 23.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Seoul Electronics Telecom vs. LG Chemicals
Performance |
| Timeline |
| Seoul Electronics Telecom |
| LG Chemicals |
Seoul Electronics and LG Chemicals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Seoul Electronics and LG Chemicals
The main advantage of trading using opposite Seoul Electronics and LG Chemicals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Seoul Electronics 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.| Seoul Electronics vs. Amogreentech Co | Seoul Electronics vs. Narae Nanotech Corp | Seoul Electronics vs. HB Technology TD | Seoul Electronics vs. Samsung Publishing Co |
| LG Chemicals vs. Taegu Broadcasting | LG Chemicals vs. Jeju Air Co | LG Chemicals vs. Iljin Display | LG Chemicals vs. Seoul Electronics Telecom |
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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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