Correlation Between LG Chemicals and SK Telecom
Can any of the company-specific risk be diversified away by investing in both LG Chemicals and SK Telecom 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 SK Telecom into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LG Chemicals and SK Telecom Co, you can compare the effects of market volatilities on LG Chemicals and SK Telecom 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 SK Telecom. Check out your portfolio center. Please also check ongoing floating volatility patterns of LG Chemicals and SK Telecom.
Diversification Opportunities for LG Chemicals and SK Telecom
0.35 | Correlation Coefficient |
Weak diversification
The 3 months correlation between 051910 and 017670 is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding LG Chemicals and SK Telecom Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SK Telecom 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 SK Telecom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SK Telecom has no effect on the direction of LG Chemicals i.e., LG Chemicals and SK Telecom go up and down completely randomly.
Pair Corralation between LG Chemicals and SK Telecom
Assuming the 90 days trading horizon LG Chemicals is expected to generate 2.36 times more return on investment than SK Telecom. However, LG Chemicals is 2.36 times more volatile than SK Telecom Co. It trades about -0.06 of its potential returns per unit of risk. SK Telecom Co is currently generating about -0.13 per unit of risk. If you would invest 24,700,000 in LG Chemicals on October 28, 2024 and sell it today you would lose (750,000) from holding LG Chemicals or give up 3.04% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
LG Chemicals vs. SK Telecom Co
Performance |
| Timeline |
| LG Chemicals |
| SK Telecom |
LG Chemicals and SK Telecom Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LG Chemicals and SK Telecom
The main advantage of trading using opposite LG Chemicals and SK Telecom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LG Chemicals position performs unexpectedly, SK Telecom 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 SK Telecom will offset losses from the drop in SK Telecom's long position.| LG Chemicals vs. Taegu Broadcasting | LG Chemicals vs. Miwon Chemical | LG Chemicals vs. ABCO Electronics Co | LG Chemicals vs. Samji Electronics Co |
| SK Telecom vs. Shinhan Inverse Copper | SK Telecom vs. Sam Yang Foods | SK Telecom vs. Daishin Information Communications | SK Telecom vs. Kisan 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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