Correlation Between LG Chemicals and Hwaseung Industries
Can any of the company-specific risk be diversified away by investing in both LG Chemicals and Hwaseung Industries 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 Hwaseung Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LG Chemicals and Hwaseung Industries Co, you can compare the effects of market volatilities on LG Chemicals and Hwaseung Industries 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 Hwaseung Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of LG Chemicals and Hwaseung Industries.
Diversification Opportunities for LG Chemicals and Hwaseung Industries
-0.31 | Correlation Coefficient |
Very good diversification
The 3 months correlation between 051910 and Hwaseung is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding LG Chemicals and Hwaseung Industries Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hwaseung Industries 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 Hwaseung Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hwaseung Industries has no effect on the direction of LG Chemicals i.e., LG Chemicals and Hwaseung Industries go up and down completely randomly.
Pair Corralation between LG Chemicals and Hwaseung Industries
Assuming the 90 days trading horizon LG Chemicals is expected to under-perform the Hwaseung Industries. In addition to that, LG Chemicals is 1.5 times more volatile than Hwaseung Industries Co. It trades about -0.23 of its total potential returns per unit of risk. Hwaseung Industries Co is currently generating about -0.01 per unit of volatility. If you would invest 413,000 in Hwaseung Industries Co on August 27, 2024 and sell it today you would lose (2,500) from holding Hwaseung Industries Co or give up 0.61% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
LG Chemicals vs. Hwaseung Industries Co
Performance |
| Timeline |
| LG Chemicals |
| Hwaseung Industries |
LG Chemicals and Hwaseung Industries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LG Chemicals and Hwaseung Industries
The main advantage of trading using opposite LG Chemicals and Hwaseung Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LG Chemicals position performs unexpectedly, Hwaseung Industries 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 Hwaseung Industries will offset losses from the drop in Hwaseung Industries' long position.| LG Chemicals vs. Cloud Air CoLtd | LG Chemicals vs. Iljin Display | LG Chemicals vs. Kakao Games Corp | LG Chemicals vs. Tway Air Co |
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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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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