Correlation Between LG Chemicals and CG Hi
Can any of the company-specific risk be diversified away by investing in both LG Chemicals and CG Hi 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 CG Hi into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LG Chemicals and CG Hi Tech, you can compare the effects of market volatilities on LG Chemicals and CG Hi 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 CG Hi. Check out your portfolio center. Please also check ongoing floating volatility patterns of LG Chemicals and CG Hi.
Diversification Opportunities for LG Chemicals and CG Hi
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between 051910 and 264660 is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding LG Chemicals and CG Hi Tech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CG Hi Tech 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 CG Hi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CG Hi Tech has no effect on the direction of LG Chemicals i.e., LG Chemicals and CG Hi go up and down completely randomly.
Pair Corralation between LG Chemicals and CG Hi
Assuming the 90 days trading horizon LG Chemicals is expected to under-perform the CG Hi. In addition to that, LG Chemicals is 1.11 times more volatile than CG Hi Tech. It trades about -0.06 of its total potential returns per unit of risk. CG Hi Tech is currently generating about 0.0 per unit of volatility. If you would invest 1,124,375 in CG Hi Tech on September 2, 2024 and sell it today you would lose (136,375) from holding CG Hi Tech or give up 12.13% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
LG Chemicals vs. CG Hi Tech
Performance |
| Timeline |
| LG Chemicals |
| CG Hi Tech |
LG Chemicals and CG Hi Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LG Chemicals and CG Hi
The main advantage of trading using opposite LG Chemicals and CG Hi positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LG Chemicals position performs unexpectedly, CG Hi 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 CG Hi will offset losses from the drop in CG Hi'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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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