Correlation Between LG Chemicals and Digital Multimedia
Can any of the company-specific risk be diversified away by investing in both LG Chemicals and Digital Multimedia 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 Digital Multimedia into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LG Chemicals and Digital Multimedia Technology, you can compare the effects of market volatilities on LG Chemicals and Digital Multimedia 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 Digital Multimedia. Check out your portfolio center. Please also check ongoing floating volatility patterns of LG Chemicals and Digital Multimedia.
Diversification Opportunities for LG Chemicals and Digital Multimedia
0.56 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between 051910 and Digital is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding LG Chemicals and Digital Multimedia Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Digital Multimedia 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 Digital Multimedia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Digital Multimedia has no effect on the direction of LG Chemicals i.e., LG Chemicals and Digital Multimedia go up and down completely randomly.
Pair Corralation between LG Chemicals and Digital Multimedia
Assuming the 90 days trading horizon LG Chemicals is expected to under-perform the Digital Multimedia. But the stock apears to be less risky and, when comparing its historical volatility, LG Chemicals is 1.2 times less risky than Digital Multimedia. The stock trades about -0.16 of its potential returns per unit of risk. The Digital Multimedia Technology is currently generating about -0.13 of returns per unit of risk over similar time horizon. If you would invest 182,000 in Digital Multimedia Technology on August 29, 2024 and sell it today you would lose (17,700) from holding Digital Multimedia Technology or give up 9.73% 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. Digital Multimedia Technology
Performance |
| Timeline |
| LG Chemicals |
| Digital Multimedia |
LG Chemicals and Digital Multimedia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LG Chemicals and Digital Multimedia
The main advantage of trading using opposite LG Chemicals and Digital Multimedia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LG Chemicals position performs unexpectedly, Digital Multimedia 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 Digital Multimedia will offset losses from the drop in Digital Multimedia's long position.| LG Chemicals vs. Hyundai Industrial Co | LG Chemicals vs. Songwon Industrial Co | LG Chemicals vs. Daiyang Metal Co | LG Chemicals vs. Pungguk Ethanol Industrial |
| Digital Multimedia vs. AptaBio Therapeutics | Digital Multimedia vs. Daewoo SBI SPAC | Digital Multimedia vs. Dream Security co | Digital Multimedia vs. Microfriend |
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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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