Correlation Between LG Chemicals and Next Entertainment
Can any of the company-specific risk be diversified away by investing in both LG Chemicals and Next Entertainment 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 Next Entertainment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LG Chemicals and Next Entertainment World, you can compare the effects of market volatilities on LG Chemicals and Next Entertainment 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 Next Entertainment. Check out your portfolio center. Please also check ongoing floating volatility patterns of LG Chemicals and Next Entertainment.
Diversification Opportunities for LG Chemicals and Next Entertainment
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between 051910 and Next is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding LG Chemicals and Next Entertainment World in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Next Entertainment World 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 Next Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Next Entertainment World has no effect on the direction of LG Chemicals i.e., LG Chemicals and Next Entertainment go up and down completely randomly.
Pair Corralation between LG Chemicals and Next Entertainment
Assuming the 90 days trading horizon LG Chemicals is expected to generate 0.8 times more return on investment than Next Entertainment. However, LG Chemicals is 1.25 times less risky than Next Entertainment. It trades about -0.05 of its potential returns per unit of risk. Next Entertainment World is currently generating about -0.07 per unit of risk. If you would invest 67,000,000 in LG Chemicals on August 29, 2024 and sell it today you would lose (36,300,000) from holding LG Chemicals or give up 54.18% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
LG Chemicals vs. Next Entertainment World
Performance |
| Timeline |
| LG Chemicals |
| Next Entertainment World |
LG Chemicals and Next Entertainment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LG Chemicals and Next Entertainment
The main advantage of trading using opposite LG Chemicals and Next Entertainment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LG Chemicals position performs unexpectedly, Next Entertainment 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 Next Entertainment will offset losses from the drop in Next Entertainment'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 |
| Next Entertainment vs. AfreecaTV Co | Next Entertainment vs. SS TECH | Next Entertainment vs. Busan Industrial Co | Next Entertainment vs. Busan Ind |
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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