Correlation Between Ssangyong Materials and LG Chem
Can any of the company-specific risk be diversified away by investing in both Ssangyong Materials and LG Chem 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 Ssangyong Materials and LG Chem into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ssangyong Materials Corp and LG Chem, you can compare the effects of market volatilities on Ssangyong Materials and LG Chem 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 Ssangyong Materials with a short position of LG Chem. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ssangyong Materials and LG Chem.
Diversification Opportunities for Ssangyong Materials and LG Chem
0.37 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Ssangyong and 051915 is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Ssangyong Materials Corp and LG Chem in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LG Chem and Ssangyong Materials 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 Ssangyong Materials Corp are associated (or correlated) with LG Chem. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LG Chem has no effect on the direction of Ssangyong Materials i.e., Ssangyong Materials and LG Chem go up and down completely randomly.
Pair Corralation between Ssangyong Materials and LG Chem
Assuming the 90 days trading horizon Ssangyong Materials Corp is expected to generate 1.63 times more return on investment than LG Chem. However, Ssangyong Materials is 1.63 times more volatile than LG Chem. It trades about 0.01 of its potential returns per unit of risk. LG Chem is currently generating about -0.05 per unit of risk. If you would invest 262,163 in Ssangyong Materials Corp on October 25, 2024 and sell it today you would lose (36,663) from holding Ssangyong Materials Corp or give up 13.98% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ssangyong Materials Corp vs. LG Chem
Performance |
| Timeline |
| Ssangyong Materials Corp |
| LG Chem |
Ssangyong Materials and LG Chem Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ssangyong Materials and LG Chem
The main advantage of trading using opposite Ssangyong Materials and LG Chem positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ssangyong Materials position performs unexpectedly, LG Chem 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 Chem will offset losses from the drop in LG Chem's long position.| Ssangyong Materials vs. KB Financial Group | Ssangyong Materials vs. Shinhan Financial Group | Ssangyong Materials vs. Hana Financial | Ssangyong Materials vs. Woori Financial Group |
| LG Chem vs. INFINITT Healthcare Co | LG Chem vs. Netmarble Games Corp | LG Chem vs. Ssangyong Materials Corp | LG Chem vs. LAKE MATERIALS LTD |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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