Correlation Between LG Chemicals and NOVATECH
Can any of the company-specific risk be diversified away by investing in both LG Chemicals and NOVATECH 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 NOVATECH into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LG Chemicals and NOVATECH Co, you can compare the effects of market volatilities on LG Chemicals and NOVATECH 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 NOVATECH. Check out your portfolio center. Please also check ongoing floating volatility patterns of LG Chemicals and NOVATECH.
Diversification Opportunities for LG Chemicals and NOVATECH
-0.79 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between 051910 and NOVATECH is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding LG Chemicals and NOVATECH Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NOVATECH 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 NOVATECH. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NOVATECH has no effect on the direction of LG Chemicals i.e., LG Chemicals and NOVATECH go up and down completely randomly.
Pair Corralation between LG Chemicals and NOVATECH
Assuming the 90 days trading horizon LG Chemicals is expected to under-perform the NOVATECH. But the stock apears to be less risky and, when comparing its historical volatility, LG Chemicals is 1.92 times less risky than NOVATECH. The stock trades about -0.16 of its potential returns per unit of risk. The NOVATECH Co is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest 1,179,000 in NOVATECH Co on November 1, 2024 and sell it today you would earn a total of 760,000 from holding NOVATECH Co or generate 64.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
LG Chemicals vs. NOVATECH Co
Performance |
| Timeline |
| LG Chemicals |
| NOVATECH |
LG Chemicals and NOVATECH Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LG Chemicals and NOVATECH
The main advantage of trading using opposite LG Chemicals and NOVATECH positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LG Chemicals position performs unexpectedly, NOVATECH 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 NOVATECH will offset losses from the drop in NOVATECH's long position.| LG Chemicals vs. Sangsin Energy Display | LG Chemicals vs. Dongil Metal Co | LG Chemicals vs. LG Display Co | LG Chemicals vs. Kukil Metal Co |
| NOVATECH vs. Ecopro BM Co | NOVATECH vs. Sangsin Energy Display | NOVATECH vs. Bosung Power Technology | NOVATECH vs. Busan Industrial 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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