Correlation Between LG Chemicals and Dongwoo Farm
Can any of the company-specific risk be diversified away by investing in both LG Chemicals and Dongwoo Farm 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 Dongwoo Farm into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LG Chemicals and Dongwoo Farm To, you can compare the effects of market volatilities on LG Chemicals and Dongwoo Farm 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 Dongwoo Farm. Check out your portfolio center. Please also check ongoing floating volatility patterns of LG Chemicals and Dongwoo Farm.
Diversification Opportunities for LG Chemicals and Dongwoo Farm
0.58 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between 051910 and Dongwoo is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding LG Chemicals and Dongwoo Farm To in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dongwoo Farm To 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 Dongwoo Farm. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dongwoo Farm To has no effect on the direction of LG Chemicals i.e., LG Chemicals and Dongwoo Farm go up and down completely randomly.
Pair Corralation between LG Chemicals and Dongwoo Farm
Assuming the 90 days trading horizon LG Chemicals is expected to under-perform the Dongwoo Farm. In addition to that, LG Chemicals is 1.62 times more volatile than Dongwoo Farm To. It trades about -0.05 of its total potential returns per unit of risk. Dongwoo Farm To is currently generating about -0.04 per unit of volatility. If you would invest 274,500 in Dongwoo Farm To on September 3, 2024 and sell it today you would lose (83,500) from holding Dongwoo Farm To or give up 30.42% 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. Dongwoo Farm To
Performance |
| Timeline |
| LG Chemicals |
| Dongwoo Farm To |
LG Chemicals and Dongwoo Farm Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LG Chemicals and Dongwoo Farm
The main advantage of trading using opposite LG Chemicals and Dongwoo Farm positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LG Chemicals position performs unexpectedly, Dongwoo Farm 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 Dongwoo Farm will offset losses from the drop in Dongwoo Farm's long position.| LG Chemicals vs. Eagle Veterinary Technology | LG Chemicals vs. Daehan Synthetic Fiber | LG Chemicals vs. Chin Yang Chemical | LG Chemicals vs. Global Standard Technology |
| Dongwoo Farm vs. Hanjoo Light Metal | Dongwoo Farm vs. LG Chemicals | Dongwoo Farm vs. Hannong Chemicals | Dongwoo Farm vs. Kukil Metal 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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