Correlation Between LG Chem and MohenzCoLtd
Can any of the company-specific risk be diversified away by investing in both LG Chem and MohenzCoLtd 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 Chem and MohenzCoLtd into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LG Chem and MohenzCoLtd, you can compare the effects of market volatilities on LG Chem and MohenzCoLtd 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 Chem with a short position of MohenzCoLtd. Check out your portfolio center. Please also check ongoing floating volatility patterns of LG Chem and MohenzCoLtd.
Diversification Opportunities for LG Chem and MohenzCoLtd
-0.84 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between 051915 and MohenzCoLtd is -0.84. Overlapping area represents the amount of risk that can be diversified away by holding LG Chem and MohenzCoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MohenzCoLtd and LG Chem 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 Chem are associated (or correlated) with MohenzCoLtd. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MohenzCoLtd has no effect on the direction of LG Chem i.e., LG Chem and MohenzCoLtd go up and down completely randomly.
Pair Corralation between LG Chem and MohenzCoLtd
Assuming the 90 days trading horizon LG Chem is expected to under-perform the MohenzCoLtd. But the stock apears to be less risky and, when comparing its historical volatility, LG Chem is 1.27 times less risky than MohenzCoLtd. The stock trades about -0.05 of its potential returns per unit of risk. The MohenzCoLtd is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest 425,000 in MohenzCoLtd on November 2, 2024 and sell it today you would lose (120,500) from holding MohenzCoLtd or give up 28.35% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
LG Chem vs. MohenzCoLtd
Performance |
| Timeline |
| LG Chem |
| MohenzCoLtd |
LG Chem and MohenzCoLtd Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LG Chem and MohenzCoLtd
The main advantage of trading using opposite LG Chem and MohenzCoLtd positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LG Chem position performs unexpectedly, MohenzCoLtd 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 MohenzCoLtd will offset losses from the drop in MohenzCoLtd's long position.| LG Chem vs. Innowireless Co | LG Chem vs. Daol Investment Securities | LG Chem vs. Solus Advanced Materials | LG Chem vs. LS Materials |
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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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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