Correlation Between LG Chemicals and Home Center
Can any of the company-specific risk be diversified away by investing in both LG Chemicals and Home Center 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 Home Center into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LG Chemicals and Home Center Holdings, you can compare the effects of market volatilities on LG Chemicals and Home Center 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 Home Center. Check out your portfolio center. Please also check ongoing floating volatility patterns of LG Chemicals and Home Center.
Diversification Opportunities for LG Chemicals and Home Center
0.53 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between 051910 and Home is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding LG Chemicals and Home Center Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Home Center Holdings 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 Home Center. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Home Center Holdings has no effect on the direction of LG Chemicals i.e., LG Chemicals and Home Center go up and down completely randomly.
Pair Corralation between LG Chemicals and Home Center
Assuming the 90 days trading horizon LG Chemicals is expected to under-perform the Home Center. In addition to that, LG Chemicals is 1.36 times more volatile than Home Center Holdings. It trades about -0.09 of its total potential returns per unit of risk. Home Center Holdings is currently generating about -0.07 per unit of volatility. If you would invest 129,528 in Home Center Holdings on August 31, 2024 and sell it today you would lose (52,828) from holding Home Center Holdings or give up 40.79% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
LG Chemicals vs. Home Center Holdings
Performance |
| Timeline |
| LG Chemicals |
| Home Center Holdings |
LG Chemicals and Home Center Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LG Chemicals and Home Center
The main advantage of trading using opposite LG Chemicals and Home Center positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LG Chemicals position performs unexpectedly, Home Center 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 Home Center will offset losses from the drop in Home Center's long position.| LG Chemicals vs. Orbitech Co | LG Chemicals vs. Shinsung Delta Tech | LG Chemicals vs. Sungchang Autotech Co | LG Chemicals vs. ECSTELECOM Co |
| Home Center vs. LG Chemicals | Home Center vs. POSCO Holdings | Home Center vs. Hanwha Solutions | Home Center vs. Lotte Chemical Corp |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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