Correlation Between LG Chemicals and Shinhan Financial
Can any of the company-specific risk be diversified away by investing in both LG Chemicals and Shinhan Financial 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 Shinhan Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LG Chemicals and Shinhan Financial Group, you can compare the effects of market volatilities on LG Chemicals and Shinhan Financial 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 Shinhan Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of LG Chemicals and Shinhan Financial.
Diversification Opportunities for LG Chemicals and Shinhan Financial
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between 051910 and Shinhan is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding LG Chemicals and Shinhan Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shinhan Financial 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 Shinhan Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shinhan Financial has no effect on the direction of LG Chemicals i.e., LG Chemicals and Shinhan Financial go up and down completely randomly.
Pair Corralation between LG Chemicals and Shinhan Financial
Assuming the 90 days trading horizon LG Chemicals is expected to under-perform the Shinhan Financial. In addition to that, LG Chemicals is 1.23 times more volatile than Shinhan Financial Group. It trades about -0.25 of its total potential returns per unit of risk. Shinhan Financial Group is currently generating about -0.15 per unit of volatility. If you would invest 5,430,000 in Shinhan Financial Group on September 27, 2024 and sell it today you would lose (490,000) from holding Shinhan Financial Group or give up 9.02% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
LG Chemicals vs. Shinhan Financial Group
Performance |
| Timeline |
| LG Chemicals |
| Shinhan Financial |
LG Chemicals and Shinhan Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LG Chemicals and Shinhan Financial
The main advantage of trading using opposite LG Chemicals and Shinhan Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LG Chemicals position performs unexpectedly, Shinhan Financial 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 Shinhan Financial will offset losses from the drop in Shinhan Financial's long position.| LG Chemicals vs. POSCO Holdings | LG Chemicals vs. Hanwha Solutions | LG Chemicals vs. Lotte Chemical Corp | LG Chemicals vs. Hyundai Steel |
| Shinhan Financial vs. Kukdong Oil Chemicals | Shinhan Financial vs. LG Chemicals | Shinhan Financial vs. ABOV Semiconductor Co | Shinhan Financial vs. SK Chemicals 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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