Correlation Between LG Chemicals and Pharma Reaserch
Can any of the company-specific risk be diversified away by investing in both LG Chemicals and Pharma Reaserch 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 Pharma Reaserch into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LG Chemicals and Pharma Reaserch Prod, you can compare the effects of market volatilities on LG Chemicals and Pharma Reaserch 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 Pharma Reaserch. Check out your portfolio center. Please also check ongoing floating volatility patterns of LG Chemicals and Pharma Reaserch.
Diversification Opportunities for LG Chemicals and Pharma Reaserch
-0.56 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between 051910 and Pharma is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding LG Chemicals and Pharma Reaserch Prod in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pharma Reaserch Prod 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 Pharma Reaserch. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pharma Reaserch Prod has no effect on the direction of LG Chemicals i.e., LG Chemicals and Pharma Reaserch go up and down completely randomly.
Pair Corralation between LG Chemicals and Pharma Reaserch
Assuming the 90 days trading horizon LG Chemicals is expected to under-perform the Pharma Reaserch. But the stock apears to be less risky and, when comparing its historical volatility, LG Chemicals is 1.3 times less risky than Pharma Reaserch. The stock trades about -0.07 of its potential returns per unit of risk. The Pharma Reaserch Prod is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 7,682,892 in Pharma Reaserch Prod on October 13, 2024 and sell it today you would earn a total of 17,417,108 from holding Pharma Reaserch Prod or generate 226.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
LG Chemicals vs. Pharma Reaserch Prod
Performance |
| Timeline |
| LG Chemicals |
| Pharma Reaserch Prod |
LG Chemicals and Pharma Reaserch Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LG Chemicals and Pharma Reaserch
The main advantage of trading using opposite LG Chemicals and Pharma Reaserch positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LG Chemicals position performs unexpectedly, Pharma Reaserch 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 Pharma Reaserch will offset losses from the drop in Pharma Reaserch's long position.| LG Chemicals vs. Daehan Steel | LG Chemicals vs. Han Kook Steel | LG Chemicals vs. Moonbae Steel | LG Chemicals vs. Ilji Technology Co |
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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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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