Correlation Between LG Chemicals and LTC CoLtd
Can any of the company-specific risk be diversified away by investing in both LG Chemicals and LTC CoLtd 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 LTC CoLtd into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LG Chemicals and LTC CoLtd, you can compare the effects of market volatilities on LG Chemicals and LTC CoLtd 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 LTC CoLtd. Check out your portfolio center. Please also check ongoing floating volatility patterns of LG Chemicals and LTC CoLtd.
Diversification Opportunities for LG Chemicals and LTC CoLtd
-0.16 | Correlation Coefficient |
Good diversification
The 3 months correlation between 051910 and LTC is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding LG Chemicals and LTC CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LTC CoLtd 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 LTC CoLtd. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LTC CoLtd has no effect on the direction of LG Chemicals i.e., LG Chemicals and LTC CoLtd go up and down completely randomly.
Pair Corralation between LG Chemicals and LTC CoLtd
Assuming the 90 days trading horizon LG Chemicals is expected to generate 0.78 times more return on investment than LTC CoLtd. However, LG Chemicals is 1.29 times less risky than LTC CoLtd. It trades about -0.09 of its potential returns per unit of risk. LTC CoLtd is currently generating about -0.22 per unit of risk. If you would invest 32,050,000 in LG Chemicals on August 31, 2024 and sell it today you would lose (1,550,000) from holding LG Chemicals or give up 4.84% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
LG Chemicals vs. LTC CoLtd
Performance |
| Timeline |
| LG Chemicals |
| LTC CoLtd |
LG Chemicals and LTC CoLtd Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LG Chemicals and LTC CoLtd
The main advantage of trading using opposite LG Chemicals and LTC CoLtd positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LG Chemicals position performs unexpectedly, LTC CoLtd 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 LTC CoLtd will offset losses from the drop in LTC CoLtd'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 |
| LTC CoLtd vs. LG Chemicals | LTC CoLtd vs. Korea Petro Chemical | LTC CoLtd vs. Miwon Chemical | LTC CoLtd vs. Youngchang Chemical 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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