Correlation Between LG Chemicals and Namyang Dairy
Can any of the company-specific risk be diversified away by investing in both LG Chemicals and Namyang Dairy 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 Namyang Dairy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LG Chemicals and Namyang Dairy, you can compare the effects of market volatilities on LG Chemicals and Namyang Dairy 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 Namyang Dairy. Check out your portfolio center. Please also check ongoing floating volatility patterns of LG Chemicals and Namyang Dairy.
Diversification Opportunities for LG Chemicals and Namyang Dairy
-0.5 | Correlation Coefficient |
Very good diversification
The 3 months correlation between 051910 and Namyang is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding LG Chemicals and Namyang Dairy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Namyang Dairy 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 Namyang Dairy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Namyang Dairy has no effect on the direction of LG Chemicals i.e., LG Chemicals and Namyang Dairy go up and down completely randomly.
Pair Corralation between LG Chemicals and Namyang Dairy
Assuming the 90 days trading horizon LG Chemicals is expected to under-perform the Namyang Dairy. But the stock apears to be less risky and, when comparing its historical volatility, LG Chemicals is 33.96 times less risky than Namyang Dairy. The stock trades about -0.07 of its potential returns per unit of risk. The Namyang Dairy is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 4,472,289 in Namyang Dairy on September 2, 2024 and sell it today you would earn a total of 2,337,711 from holding Namyang Dairy or generate 52.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 99.58% |
| Values | Daily Returns |
LG Chemicals vs. Namyang Dairy
Performance |
| Timeline |
| LG Chemicals |
| Namyang Dairy |
LG Chemicals and Namyang Dairy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LG Chemicals and Namyang Dairy
The main advantage of trading using opposite LG Chemicals and Namyang Dairy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LG Chemicals position performs unexpectedly, Namyang Dairy 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 Namyang Dairy will offset losses from the drop in Namyang Dairy's long position.| LG Chemicals vs. POSCO Holdings | LG Chemicals vs. Hanwha Solutions | LG Chemicals vs. Hyundai Steel | LG Chemicals vs. Ecopro Co |
| Namyang Dairy vs. Korea Real Estate | Namyang Dairy vs. Korea Ratings Co | Namyang Dairy vs. IQuest Co | Namyang Dairy vs. Wonbang Tech 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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