Correlation Between LG Chemicals and Kia Corp
Can any of the company-specific risk be diversified away by investing in both LG Chemicals and Kia Corp 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 LG Chemicals and Kia Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LG Chemicals and Kia Corp, you can compare the effects of market volatilities on LG Chemicals and Kia Corp 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 LG Chemicals with a short position of Kia Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of LG Chemicals and Kia Corp.
Diversification Opportunities for LG Chemicals and Kia Corp
0.41 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between 051910 and Kia is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding LG Chemicals and Kia Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kia Corp and LG Chemicals 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 LG Chemicals are associated (or correlated) with Kia Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kia Corp has no effect on the direction of LG Chemicals i.e., LG Chemicals and Kia Corp go up and down completely randomly.
Pair Corralation between LG Chemicals and Kia Corp
Assuming the 90 days trading horizon LG Chemicals is expected to under-perform the Kia Corp. In addition to that, LG Chemicals is 1.05 times more volatile than Kia Corp. It trades about -0.09 of its total potential returns per unit of risk. Kia Corp is currently generating about 0.03 per unit of volatility. If you would invest 9,410,000 in Kia Corp on August 31, 2024 and sell it today you would earn a total of 90,000 from holding Kia Corp or generate 0.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
LG Chemicals vs. Kia Corp
Performance |
| Timeline |
| LG Chemicals |
| Kia Corp |
LG Chemicals and Kia Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LG Chemicals and Kia Corp
The main advantage of trading using opposite LG Chemicals and Kia Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LG Chemicals position performs unexpectedly, Kia Corp 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 Kia Corp will offset losses from the drop in Kia Corp's long position.| LG Chemicals vs. Orbitech Co | LG Chemicals vs. Shinsung Delta Tech | LG Chemicals vs. Sungchang Autotech Co | LG Chemicals vs. ECSTELECOM Co |
| Kia Corp vs. LG Display | Kia Corp vs. Hyundai Motor | Kia Corp vs. Hyundai Motor Co | Kia Corp vs. Hyundai Motor 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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