Correlation Between LG Chemicals and Asia Pacific
Can any of the company-specific risk be diversified away by investing in both LG Chemicals and Asia Pacific 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 Asia Pacific into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LG Chemicals and Asia Pacific Satellite, you can compare the effects of market volatilities on LG Chemicals and Asia Pacific 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 Asia Pacific. Check out your portfolio center. Please also check ongoing floating volatility patterns of LG Chemicals and Asia Pacific.
Diversification Opportunities for LG Chemicals and Asia Pacific
-0.65 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between 051910 and Asia is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding LG Chemicals and Asia Pacific Satellite in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Asia Pacific Satellite 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 Asia Pacific. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Asia Pacific Satellite has no effect on the direction of LG Chemicals i.e., LG Chemicals and Asia Pacific go up and down completely randomly.
Pair Corralation between LG Chemicals and Asia Pacific
Assuming the 90 days trading horizon LG Chemicals is expected to under-perform the Asia Pacific. But the stock apears to be less risky and, when comparing its historical volatility, LG Chemicals is 1.56 times less risky than Asia Pacific. The stock trades about -0.06 of its potential returns per unit of risk. The Asia Pacific Satellite is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest 1,554,000 in Asia Pacific Satellite on September 2, 2024 and sell it today you would lose (248,000) from holding Asia Pacific Satellite or give up 15.96% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
LG Chemicals vs. Asia Pacific Satellite
Performance |
| Timeline |
| LG Chemicals |
| Asia Pacific Satellite |
LG Chemicals and Asia Pacific Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LG Chemicals and Asia Pacific
The main advantage of trading using opposite LG Chemicals and Asia Pacific positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LG Chemicals position performs unexpectedly, Asia Pacific 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 Asia Pacific will offset losses from the drop in Asia Pacific's long position.| LG Chemicals vs. POSCO Holdings | LG Chemicals vs. Hanwha Solutions | LG Chemicals vs. Hyundai Steel | LG Chemicals vs. Ecopro 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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