Correlation Between LG Chem and IQuest
Can any of the company-specific risk be diversified away by investing in both LG Chem and IQuest 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 IQuest into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LG Chem and IQuest Co, you can compare the effects of market volatilities on LG Chem and IQuest 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 IQuest. Check out your portfolio center. Please also check ongoing floating volatility patterns of LG Chem and IQuest.
Diversification Opportunities for LG Chem and IQuest
Good diversification
The 3 months correlation between 051915 and IQuest is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding LG Chem and IQuest Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IQuest 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 IQuest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IQuest has no effect on the direction of LG Chem i.e., LG Chem and IQuest go up and down completely randomly.
Pair Corralation between LG Chem and IQuest
Assuming the 90 days trading horizon LG Chem is expected to under-perform the IQuest. But the stock apears to be less risky and, when comparing its historical volatility, LG Chem is 1.08 times less risky than IQuest. The stock trades about -0.23 of its potential returns per unit of risk. The IQuest Co is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 212,959 in IQuest Co on November 1, 2024 and sell it today you would earn a total of 32,541 from holding IQuest Co or generate 15.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
LG Chem vs. IQuest Co
Performance |
| Timeline |
| LG Chem |
| IQuest |
LG Chem and IQuest Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LG Chem and IQuest
The main advantage of trading using opposite LG Chem and IQuest positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LG Chem position performs unexpectedly, IQuest 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 IQuest will offset losses from the drop in IQuest's long position.| LG Chem vs. DB Insurance Co | LG Chem vs. Daeduck Electronics Co | LG Chem vs. Korean Reinsurance Co | LG Chem vs. SungMoon Electronics Co |
| IQuest vs. Samsung Electronics Co | IQuest vs. Samsung Electronics Co | IQuest vs. LG Energy Solution | IQuest 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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