Correlation Between LG Chemicals and BYON
Can any of the company-specific risk be diversified away by investing in both LG Chemicals and BYON 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 BYON into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LG Chemicals and BYON Co, you can compare the effects of market volatilities on LG Chemicals and BYON 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 BYON. Check out your portfolio center. Please also check ongoing floating volatility patterns of LG Chemicals and BYON.
Diversification Opportunities for LG Chemicals and BYON
0.03 | Correlation Coefficient |
Significant diversification
The 3 months correlation between 051910 and BYON is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding LG Chemicals and BYON Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BYON 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 BYON. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BYON has no effect on the direction of LG Chemicals i.e., LG Chemicals and BYON go up and down completely randomly.
Pair Corralation between LG Chemicals and BYON
Assuming the 90 days trading horizon LG Chemicals is expected to under-perform the BYON. But the stock apears to be less risky and, when comparing its historical volatility, LG Chemicals is 2.22 times less risky than BYON. The stock trades about -0.15 of its potential returns per unit of risk. The BYON Co is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest 62,000 in BYON Co on September 1, 2024 and sell it today you would earn a total of 21,000 from holding BYON Co or generate 33.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
LG Chemicals vs. BYON Co
Performance |
| Timeline |
| LG Chemicals |
| BYON |
LG Chemicals and BYON Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LG Chemicals and BYON
The main advantage of trading using opposite LG Chemicals and BYON positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LG Chemicals position performs unexpectedly, BYON 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 BYON will offset losses from the drop in BYON's long position.| LG Chemicals vs. Korea Investment Holdings | LG Chemicals vs. INNOX Advanced Materials | LG Chemicals vs. Union Materials Corp | LG Chemicals vs. DB Financial Investment |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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