Correlation Between LG Chemicals and Lotte Chemical
Can any of the company-specific risk be diversified away by investing in both LG Chemicals and Lotte Chemical 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 Lotte Chemical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LG Chemicals and Lotte Chemical Corp, you can compare the effects of market volatilities on LG Chemicals and Lotte Chemical 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 Lotte Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of LG Chemicals and Lotte Chemical.
Diversification Opportunities for LG Chemicals and Lotte Chemical
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between 051910 and Lotte is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding LG Chemicals and Lotte Chemical Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lotte Chemical Corp 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 Lotte Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lotte Chemical Corp has no effect on the direction of LG Chemicals i.e., LG Chemicals and Lotte Chemical go up and down completely randomly.
Pair Corralation between LG Chemicals and Lotte Chemical
Assuming the 90 days trading horizon LG Chemicals is expected to generate 0.9 times more return on investment than Lotte Chemical. However, LG Chemicals is 1.12 times less risky than Lotte Chemical. It trades about -0.07 of its potential returns per unit of risk. Lotte Chemical Corp is currently generating about -0.07 per unit of risk. If you would invest 67,000,000 in LG Chemicals on November 2, 2024 and sell it today you would lose (43,050,000) from holding LG Chemicals or give up 64.25% 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. Lotte Chemical Corp
Performance |
| Timeline |
| LG Chemicals |
| Lotte Chemical Corp |
LG Chemicals and Lotte Chemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LG Chemicals and Lotte Chemical
The main advantage of trading using opposite LG Chemicals and Lotte Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LG Chemicals position performs unexpectedly, Lotte Chemical 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 Lotte Chemical will offset losses from the drop in Lotte Chemical'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 |
| Lotte Chemical vs. GS Retail Co | Lotte Chemical vs. Tway Air Co | Lotte Chemical vs. Dongil Metal Co | Lotte Chemical vs. Korean Air Lines |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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