Correlation Between Cenit and LG Chemicals
Can any of the company-specific risk be diversified away by investing in both Cenit 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 Cenit and LG Chemicals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cenit Co and LG Chemicals, you can compare the effects of market volatilities on Cenit 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 Cenit with a short position of LG Chemicals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cenit and LG Chemicals.
Diversification Opportunities for Cenit and LG Chemicals
0.36 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Cenit and 051910 is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Cenit Co and LG Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LG Chemicals and Cenit 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 Cenit 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 Cenit i.e., Cenit and LG Chemicals go up and down completely randomly.
Pair Corralation between Cenit and LG Chemicals
Assuming the 90 days trading horizon Cenit Co is expected to generate 0.59 times more return on investment than LG Chemicals. However, Cenit Co is 1.71 times less risky than LG Chemicals. It trades about -0.06 of its potential returns per unit of risk. LG Chemicals is currently generating about -0.18 per unit of risk. If you would invest 154,800 in Cenit Co on September 2, 2024 and sell it today you would lose (3,500) from holding Cenit Co or give up 2.26% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cenit Co vs. LG Chemicals
Performance |
| Timeline |
| Cenit |
| LG Chemicals |
Cenit and LG Chemicals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cenit and LG Chemicals
The main advantage of trading using opposite Cenit and LG Chemicals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cenit 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 Cenit 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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