Correlation Between HLB Power and LG Chemicals
Can any of the company-specific risk be diversified away by investing in both HLB Power 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 HLB Power and LG Chemicals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between HLB Power Co and LG Chemicals, you can compare the effects of market volatilities on HLB Power 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 HLB Power with a short position of LG Chemicals. Check out your portfolio center. Please also check ongoing floating volatility patterns of HLB Power and LG Chemicals.
Diversification Opportunities for HLB Power and LG Chemicals
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between HLB and 051910 is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding HLB Power Co and LG Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LG Chemicals and HLB Power 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 HLB Power 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 HLB Power i.e., HLB Power and LG Chemicals go up and down completely randomly.
Pair Corralation between HLB Power and LG Chemicals
Assuming the 90 days trading horizon HLB Power Co is expected to generate 1.51 times more return on investment than LG Chemicals. However, HLB Power is 1.51 times more volatile than LG Chemicals. It trades about -0.03 of its potential returns per unit of risk. LG Chemicals is currently generating about -0.06 per unit of risk. If you would invest 92,300 in HLB Power Co on September 12, 2024 and sell it today you would lose (57,300) from holding HLB Power Co or give up 62.08% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
HLB Power Co vs. LG Chemicals
Performance |
| Timeline |
| HLB Power |
| LG Chemicals |
HLB Power and LG Chemicals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HLB Power and LG Chemicals
The main advantage of trading using opposite HLB Power and LG Chemicals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HLB Power 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.| HLB Power vs. Cloud Air CoLtd | HLB Power vs. Jin Air Co | HLB Power vs. Daejung Chemicals Metals | HLB Power vs. iNtRON Biotechnology |
| LG Chemicals vs. POSCO Holdings | LG Chemicals vs. Hanwha Solutions | LG Chemicals vs. Lotte Chemical Corp | LG Chemicals vs. Hyundai Steel |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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