Correlation Between LG Chemicals and LS Materials
Can any of the company-specific risk be diversified away by investing in both LG Chemicals and LS Materials 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 LS Materials into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LG Chemicals and LS Materials, you can compare the effects of market volatilities on LG Chemicals and LS Materials 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 LS Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of LG Chemicals and LS Materials.
Diversification Opportunities for LG Chemicals and LS Materials
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between 051910 and 417200 is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding LG Chemicals and LS Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LS Materials 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 LS Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LS Materials has no effect on the direction of LG Chemicals i.e., LG Chemicals and LS Materials go up and down completely randomly.
Pair Corralation between LG Chemicals and LS Materials
Assuming the 90 days trading horizon LG Chemicals is expected to under-perform the LS Materials. But the stock apears to be less risky and, when comparing its historical volatility, LG Chemicals is 8.27 times less risky than LS Materials. The stock trades about -0.06 of its potential returns per unit of risk. The LS Materials is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 599,449 in LS Materials on August 29, 2024 and sell it today you would earn a total of 593,551 from holding LS Materials or generate 99.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 48.86% |
| Values | Daily Returns |
LG Chemicals vs. LS Materials
Performance |
| Timeline |
| LG Chemicals |
| LS Materials |
LG Chemicals and LS Materials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LG Chemicals and LS Materials
The main advantage of trading using opposite LG Chemicals and LS Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LG Chemicals position performs unexpectedly, LS Materials 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 LS Materials will offset losses from the drop in LS Materials' long position.| LG Chemicals vs. POSCO Holdings | LG Chemicals vs. Hanwha Solutions | LG Chemicals vs. Lotte Chemical Corp | LG Chemicals vs. Hyundai Steel |
| LS Materials vs. Samsung Electronics Co | LS Materials vs. Samsung Electronics Co | LS Materials vs. LG Energy Solution | LS Materials vs. SK Hynix |
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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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