Correlation Between LG Chemicals and ENF Technology
Can any of the company-specific risk be diversified away by investing in both LG Chemicals and ENF Technology 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 ENF Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LG Chemicals and ENF Technology Co, you can compare the effects of market volatilities on LG Chemicals and ENF Technology 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 ENF Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of LG Chemicals and ENF Technology.
Diversification Opportunities for LG Chemicals and ENF Technology
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between 051910 and ENF is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding LG Chemicals and ENF Technology Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ENF Technology 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 ENF Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ENF Technology has no effect on the direction of LG Chemicals i.e., LG Chemicals and ENF Technology go up and down completely randomly.
Pair Corralation between LG Chemicals and ENF Technology
Assuming the 90 days trading horizon LG Chemicals is expected to generate 0.9 times more return on investment than ENF Technology. However, LG Chemicals is 1.12 times less risky than ENF Technology. It trades about -0.05 of its potential returns per unit of risk. ENF Technology Co is currently generating about -0.11 per unit of risk. If you would invest 31,250,000 in LG Chemicals on September 21, 2024 and sell it today you would lose (5,450,000) from holding LG Chemicals or give up 17.44% 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. ENF Technology Co
Performance |
| Timeline |
| LG Chemicals |
| ENF Technology |
LG Chemicals and ENF Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LG Chemicals and ENF Technology
The main advantage of trading using opposite LG Chemicals and ENF Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LG Chemicals position performs unexpectedly, ENF Technology 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 ENF Technology will offset losses from the drop in ENF Technology's long position.| LG Chemicals vs. Dongil Metal Co | LG Chemicals vs. Youngsin Metal Industrial | LG Chemicals vs. Choil Aluminum | LG Chemicals vs. Sewoon Medical Co |
| ENF Technology vs. Dongjin Semichem Co | ENF Technology vs. SS TECH | ENF Technology vs. Tokai Carbon Korea | ENF Technology vs. Soulbrain Holdings 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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