Correlation Between LG Chem and BBC
Can any of the company-specific risk be diversified away by investing in both LG Chem and BBC 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 BBC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LG Chem and BBC Co, you can compare the effects of market volatilities on LG Chem and BBC 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 BBC. Check out your portfolio center. Please also check ongoing floating volatility patterns of LG Chem and BBC.
Diversification Opportunities for LG Chem and BBC
Weak diversification
The 3 months correlation between 051915 and BBC is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding LG Chem and BBC Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BBC Co 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 BBC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BBC Co has no effect on the direction of LG Chem i.e., LG Chem and BBC go up and down completely randomly.
Pair Corralation between LG Chem and BBC
Assuming the 90 days trading horizon LG Chem is expected to under-perform the BBC. In addition to that, LG Chem is 1.66 times more volatile than BBC Co. It trades about -0.22 of its total potential returns per unit of risk. BBC Co is currently generating about -0.08 per unit of volatility. If you would invest 814,000 in BBC Co on September 3, 2024 and sell it today you would lose (26,000) from holding BBC Co or give up 3.19% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
LG Chem vs. BBC Co
Performance |
| Timeline |
| LG Chem |
| BBC Co |
LG Chem and BBC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LG Chem and BBC
The main advantage of trading using opposite LG Chem and BBC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LG Chem position performs unexpectedly, BBC 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 BBC will offset losses from the drop in BBC's long position.| LG Chem vs. Daesung Hi Tech Co | LG Chem vs. Dongbang Transport Logistics | LG Chem vs. Iljin Display | LG Chem vs. Nice Information Telecommunication |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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