Correlation Between LG Chemicals and Hyundai Steel
Can any of the company-specific risk be diversified away by investing in both LG Chemicals and Hyundai Steel 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 Hyundai Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LG Chemicals and Hyundai Steel, you can compare the effects of market volatilities on LG Chemicals and Hyundai Steel 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 Hyundai Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of LG Chemicals and Hyundai Steel.
Diversification Opportunities for LG Chemicals and Hyundai Steel
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between 051910 and Hyundai is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding LG Chemicals and Hyundai Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hyundai Steel 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 Hyundai Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hyundai Steel has no effect on the direction of LG Chemicals i.e., LG Chemicals and Hyundai Steel go up and down completely randomly.
Pair Corralation between LG Chemicals and Hyundai Steel
Assuming the 90 days trading horizon LG Chemicals is expected to generate 1.26 times more return on investment than Hyundai Steel. However, LG Chemicals is 1.26 times more volatile than Hyundai Steel. It trades about -0.16 of its potential returns per unit of risk. Hyundai Steel is currently generating about -0.4 per unit of risk. If you would invest 33,900,000 in LG Chemicals on August 29, 2024 and sell it today you would lose (3,200,000) from holding LG Chemicals or give up 9.44% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
LG Chemicals vs. Hyundai Steel
Performance |
| Timeline |
| LG Chemicals |
| Hyundai Steel |
LG Chemicals and Hyundai Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LG Chemicals and Hyundai Steel
The main advantage of trading using opposite LG Chemicals and Hyundai Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LG Chemicals position performs unexpectedly, Hyundai Steel 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 Hyundai Steel will offset losses from the drop in Hyundai Steel's long position.| LG Chemicals vs. Hyundai Industrial Co | LG Chemicals vs. Songwon Industrial Co | LG Chemicals vs. Daiyang Metal Co | LG Chemicals vs. Pungguk Ethanol Industrial |
| Hyundai Steel vs. LG Chemicals | Hyundai Steel vs. Lotte Chemical Corp | Hyundai Steel vs. Seah Steel Corp |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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