Correlation Between LG Chemicals and LG Chem
Can any of the company-specific risk be diversified away by investing in both LG Chemicals and LG Chem 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 LG Chem into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LG Chemicals and LG Chem, you can compare the effects of market volatilities on LG Chemicals and LG Chem 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 LG Chem. Check out your portfolio center. Please also check ongoing floating volatility patterns of LG Chemicals and LG Chem.
Diversification Opportunities for LG Chemicals and LG Chem
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between 051910 and 051915 is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding LG Chemicals and LG Chem in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LG Chem 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 LG Chem. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LG Chem has no effect on the direction of LG Chemicals i.e., LG Chemicals and LG Chem go up and down completely randomly.
Pair Corralation between LG Chemicals and LG Chem
Assuming the 90 days trading horizon LG Chemicals is expected to under-perform the LG Chem. But the stock apears to be less risky and, when comparing its historical volatility, LG Chemicals is 1.12 times less risky than LG Chem. The stock trades about -0.14 of its potential returns per unit of risk. The LG Chem is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest 22,650,000 in LG Chem on August 25, 2024 and sell it today you would lose (1,450,000) from holding LG Chem or give up 6.4% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
LG Chemicals vs. LG Chem
Performance |
| Timeline |
| LG Chemicals |
| LG Chem |
LG Chemicals and LG Chem Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LG Chemicals and LG Chem
The main advantage of trading using opposite LG Chemicals and LG Chem positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LG Chemicals position performs unexpectedly, LG Chem 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 LG Chem will offset losses from the drop in LG Chem's long position.| LG Chemicals vs. POSCO Holdings | LG Chemicals vs. Lotte Chemical Corp | LG Chemicals vs. Hyundai Steel | LG Chemicals vs. Dongkuk Steel Mill |
| LG Chem vs. E Investment Development | LG Chem vs. Dongbang Transport Logistics | LG Chem vs. Heungkuk Metaltech CoLtd | LG Chem vs. Choil Aluminum |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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