Correlation Between LG Chemicals and SGC Energy
Can any of the company-specific risk be diversified away by investing in both LG Chemicals and SGC Energy 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 SGC Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LG Chemicals and SGC Energy Co, you can compare the effects of market volatilities on LG Chemicals and SGC Energy 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 SGC Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of LG Chemicals and SGC Energy.
Diversification Opportunities for LG Chemicals and SGC Energy
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between 051910 and SGC is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding LG Chemicals and SGC Energy Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SGC Energy 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 SGC Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SGC Energy has no effect on the direction of LG Chemicals i.e., LG Chemicals and SGC Energy go up and down completely randomly.
Pair Corralation between LG Chemicals and SGC Energy
Assuming the 90 days trading horizon LG Chemicals is expected to under-perform the SGC Energy. In addition to that, LG Chemicals is 1.36 times more volatile than SGC Energy Co. It trades about -0.09 of its total potential returns per unit of risk. SGC Energy Co is currently generating about 0.01 per unit of volatility. If you would invest 2,551,619 in SGC Energy Co on August 31, 2024 and sell it today you would earn a total of 68,381 from holding SGC Energy Co or generate 2.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.45% |
| Values | Daily Returns |
LG Chemicals vs. SGC Energy Co
Performance |
| Timeline |
| LG Chemicals |
| SGC Energy |
LG Chemicals and SGC Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LG Chemicals and SGC Energy
The main advantage of trading using opposite LG Chemicals and SGC Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LG Chemicals position performs unexpectedly, SGC Energy 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 SGC Energy will offset losses from the drop in SGC Energy'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 |
| SGC Energy vs. Eagle Veterinary Technology | SGC Energy vs. RFTech Co | SGC Energy vs. Dongnam Chemical Co | SGC Energy vs. Chin Yang Chemical |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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