Correlation Between LG Chem and SK Chemicals
Can any of the company-specific risk be diversified away by investing in both LG Chem and SK Chemicals 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 SK Chemicals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LG Chem and SK Chemicals Co, you can compare the effects of market volatilities on LG Chem and SK Chemicals 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 SK Chemicals. Check out your portfolio center. Please also check ongoing floating volatility patterns of LG Chem and SK Chemicals.
Diversification Opportunities for LG Chem and SK Chemicals
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between 051915 and 28513K is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding LG Chem and SK Chemicals Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SK Chemicals 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 SK Chemicals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SK Chemicals has no effect on the direction of LG Chem i.e., LG Chem and SK Chemicals go up and down completely randomly.
Pair Corralation between LG Chem and SK Chemicals
Assuming the 90 days trading horizon LG Chem is expected to under-perform the SK Chemicals. In addition to that, LG Chem is 1.75 times more volatile than SK Chemicals Co. It trades about -0.15 of its total potential returns per unit of risk. SK Chemicals Co is currently generating about -0.12 per unit of volatility. If you would invest 2,290,000 in SK Chemicals Co on November 2, 2024 and sell it today you would lose (380,000) from holding SK Chemicals Co or give up 16.59% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
LG Chem vs. SK Chemicals Co
Performance |
| Timeline |
| LG Chem |
| SK Chemicals |
LG Chem and SK Chemicals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LG Chem and SK Chemicals
The main advantage of trading using opposite LG Chem and SK Chemicals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LG Chem position performs unexpectedly, SK Chemicals 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 SK Chemicals will offset losses from the drop in SK Chemicals' 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 |
| SK Chemicals vs. Lotte Chilsung Beverage | SK Chemicals vs. PI Advanced Materials | SK Chemicals vs. EV Advanced Material | SK Chemicals vs. LAKE MATERIALS LTD |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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