Correlation Between LG Chemicals and MSC
Can any of the company-specific risk be diversified away by investing in both LG Chemicals and MSC 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 MSC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LG Chemicals and MSC Co, you can compare the effects of market volatilities on LG Chemicals and MSC 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 MSC. Check out your portfolio center. Please also check ongoing floating volatility patterns of LG Chemicals and MSC.
Diversification Opportunities for LG Chemicals and MSC
-0.41 | Correlation Coefficient |
Very good diversification
The 3 months correlation between 051910 and MSC is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding LG Chemicals and MSC Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MSC Co 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 MSC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MSC Co has no effect on the direction of LG Chemicals i.e., LG Chemicals and MSC go up and down completely randomly.
Pair Corralation between LG Chemicals and MSC
Assuming the 90 days trading horizon LG Chemicals is expected to under-perform the MSC. But the stock apears to be less risky and, when comparing its historical volatility, LG Chemicals is 1.21 times less risky than MSC. The stock trades about -0.07 of its potential returns per unit of risk. The MSC Co is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 645,046 in MSC Co on November 2, 2024 and sell it today you would lose (69,046) from holding MSC Co or give up 10.7% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
LG Chemicals vs. MSC Co
Performance |
| Timeline |
| LG Chemicals |
| MSC Co |
LG Chemicals and MSC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LG Chemicals and MSC
The main advantage of trading using opposite LG Chemicals and MSC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LG Chemicals position performs unexpectedly, MSC 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 MSC will offset losses from the drop in MSC's long position.| LG Chemicals vs. Neungyule Education | LG Chemicals vs. ECSTELECOM Co | LG Chemicals vs. Samsung Publishing Co | LG Chemicals vs. Korea Information Communications |
| MSC vs. Namhwa Industrial Co | MSC vs. Polaris Office Corp | MSC vs. Daejung Chemicals Metals | MSC vs. SKONEC Entertainment 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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