Correlation Between LG Chemicals and Dongwon System
Can any of the company-specific risk be diversified away by investing in both LG Chemicals and Dongwon System 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 Dongwon System into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LG Chemicals and Dongwon System, you can compare the effects of market volatilities on LG Chemicals and Dongwon System 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 Dongwon System. Check out your portfolio center. Please also check ongoing floating volatility patterns of LG Chemicals and Dongwon System.
Diversification Opportunities for LG Chemicals and Dongwon System
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between 051910 and Dongwon is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding LG Chemicals and Dongwon System in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dongwon System 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 Dongwon System. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dongwon System has no effect on the direction of LG Chemicals i.e., LG Chemicals and Dongwon System go up and down completely randomly.
Pair Corralation between LG Chemicals and Dongwon System
Assuming the 90 days trading horizon LG Chemicals is expected to generate 1.02 times more return on investment than Dongwon System. However, LG Chemicals is 1.02 times more volatile than Dongwon System. It trades about 0.16 of its potential returns per unit of risk. Dongwon System is currently generating about 0.11 per unit of risk. If you would invest 23,750,000 in LG Chemicals on November 27, 2024 and sell it today you would earn a total of 1,800,000 from holding LG Chemicals or generate 7.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
LG Chemicals vs. Dongwon System
Performance |
| Timeline |
| LG Chemicals |
| Dongwon System |
LG Chemicals and Dongwon System Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LG Chemicals and Dongwon System
The main advantage of trading using opposite LG Chemicals and Dongwon System positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LG Chemicals position performs unexpectedly, Dongwon System 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 Dongwon System will offset losses from the drop in Dongwon System's long position.| LG Chemicals vs. ChipsMedia | LG Chemicals vs. YG Entertainment | LG Chemicals vs. Alton Sports CoLtd | LG Chemicals vs. KMH Hitech Co |
| Dongwon System vs. DB Financial Investment | Dongwon System vs. KakaoBank Corp | Dongwon System vs. Shinhan Inverse Silver | Dongwon System vs. DoubleU Games 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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