Correlation Between LG Chemicals and POSCO Holdings
Can any of the company-specific risk be diversified away by investing in both LG Chemicals and POSCO Holdings 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 POSCO Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LG Chemicals and POSCO Holdings, you can compare the effects of market volatilities on LG Chemicals and POSCO Holdings 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 POSCO Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of LG Chemicals and POSCO Holdings.
Diversification Opportunities for LG Chemicals and POSCO Holdings
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between 051910 and POSCO is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding LG Chemicals and POSCO Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on POSCO Holdings 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 POSCO Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of POSCO Holdings has no effect on the direction of LG Chemicals i.e., LG Chemicals and POSCO Holdings go up and down completely randomly.
Pair Corralation between LG Chemicals and POSCO Holdings
Assuming the 90 days trading horizon LG Chemicals is expected to under-perform the POSCO Holdings. But the stock apears to be less risky and, when comparing its historical volatility, LG Chemicals is 1.19 times less risky than POSCO Holdings. The stock trades about -0.05 of its potential returns per unit of risk. The POSCO Holdings is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 27,379,400 in POSCO Holdings on August 28, 2024 and sell it today you would earn a total of 2,770,600 from holding POSCO Holdings or generate 10.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
LG Chemicals vs. POSCO Holdings
Performance |
| Timeline |
| LG Chemicals |
| POSCO Holdings |
LG Chemicals and POSCO Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LG Chemicals and POSCO Holdings
The main advantage of trading using opposite LG Chemicals and POSCO Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LG Chemicals position performs unexpectedly, POSCO Holdings 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 POSCO Holdings will offset losses from the drop in POSCO Holdings' 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 |
| POSCO Holdings vs. Top Material Co | POSCO Holdings vs. LS Materials | POSCO Holdings vs. Nable Communications | POSCO Holdings vs. SK Telecom 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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