Correlation Between BYON and LG Chemicals
Can any of the company-specific risk be diversified away by investing in both BYON 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 BYON and LG Chemicals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BYON Co and LG Chemicals, you can compare the effects of market volatilities on BYON 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 BYON with a short position of LG Chemicals. Check out your portfolio center. Please also check ongoing floating volatility patterns of BYON and LG Chemicals.
Diversification Opportunities for BYON and LG Chemicals
0.03 | Correlation Coefficient |
Significant diversification
The 3 months correlation between BYON and 051910 is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding BYON Co and LG Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LG Chemicals and BYON 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 BYON 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 BYON i.e., BYON and LG Chemicals go up and down completely randomly.
Pair Corralation between BYON and LG Chemicals
Assuming the 90 days trading horizon BYON Co is expected to generate 1.84 times more return on investment than LG Chemicals. However, BYON is 1.84 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 -0.05 per unit of risk. If you would invest 126,000 in BYON Co on September 3, 2024 and sell it today you would lose (43,000) from holding BYON Co or give up 34.13% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BYON Co vs. LG Chemicals
Performance |
| Timeline |
| BYON |
| LG Chemicals |
BYON and LG Chemicals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BYON and LG Chemicals
The main advantage of trading using opposite BYON and LG Chemicals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BYON 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.| BYON vs. Shinhan Financial Group | BYON vs. Tway Air Co | BYON vs. Dongbu Insurance Co | BYON vs. Seoul Broadcasting System |
| LG Chemicals vs. Eagle Veterinary Technology | LG Chemicals vs. Daehan Synthetic Fiber | LG Chemicals vs. Chin Yang Chemical | LG Chemicals vs. Global Standard Technology |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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