Correlation Between LG Chemicals and Ecoplastic
Can any of the company-specific risk be diversified away by investing in both LG Chemicals and Ecoplastic 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 Ecoplastic into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LG Chemicals and Ecoplastic, you can compare the effects of market volatilities on LG Chemicals and Ecoplastic 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 Ecoplastic. Check out your portfolio center. Please also check ongoing floating volatility patterns of LG Chemicals and Ecoplastic.
Diversification Opportunities for LG Chemicals and Ecoplastic
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between 051910 and Ecoplastic is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding LG Chemicals and Ecoplastic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ecoplastic 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 Ecoplastic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ecoplastic has no effect on the direction of LG Chemicals i.e., LG Chemicals and Ecoplastic go up and down completely randomly.
Pair Corralation between LG Chemicals and Ecoplastic
Assuming the 90 days trading horizon LG Chemicals is expected to generate 0.89 times more return on investment than Ecoplastic. However, LG Chemicals is 1.12 times less risky than Ecoplastic. It trades about -0.08 of its potential returns per unit of risk. Ecoplastic is currently generating about -0.1 per unit of risk. If you would invest 49,350,000 in LG Chemicals on September 14, 2024 and sell it today you would lose (22,500,000) from holding LG Chemicals or give up 45.59% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.62% |
| Values | Daily Returns |
LG Chemicals vs. Ecoplastic
Performance |
| Timeline |
| LG Chemicals |
| Ecoplastic |
LG Chemicals and Ecoplastic Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LG Chemicals and Ecoplastic
The main advantage of trading using opposite LG Chemicals and Ecoplastic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LG Chemicals position performs unexpectedly, Ecoplastic 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 Ecoplastic will offset losses from the drop in Ecoplastic's long position.| LG Chemicals vs. POSCO Holdings | LG Chemicals vs. Hanwha Solutions | LG Chemicals vs. Lotte Chemical Corp | LG Chemicals vs. Hyundai Steel |
| Ecoplastic vs. Youl Chon Chemical | Ecoplastic vs. T3 Entertainment Co | Ecoplastic vs. LG Chemicals | Ecoplastic vs. Barunson Entertainment Arts |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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