Correlation Between LG Chem and Coloray International
Can any of the company-specific risk be diversified away by investing in both LG Chem and Coloray International 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 Coloray International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LG Chem and Coloray International Investment, you can compare the effects of market volatilities on LG Chem and Coloray International 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 Coloray International. Check out your portfolio center. Please also check ongoing floating volatility patterns of LG Chem and Coloray International.
Diversification Opportunities for LG Chem and Coloray International
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between 051915 and Coloray is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding LG Chem and Coloray International Investme in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coloray International 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 Coloray International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coloray International has no effect on the direction of LG Chem i.e., LG Chem and Coloray International go up and down completely randomly.
Pair Corralation between LG Chem and Coloray International
Assuming the 90 days trading horizon LG Chem is expected to generate 0.79 times more return on investment than Coloray International. However, LG Chem is 1.26 times less risky than Coloray International. It trades about 0.02 of its potential returns per unit of risk. Coloray International Investment is currently generating about -0.03 per unit of risk. If you would invest 20,950,000 in LG Chem on August 25, 2024 and sell it today you would earn a total of 250,000 from holding LG Chem or generate 1.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
LG Chem vs. Coloray International Investme
Performance |
| Timeline |
| LG Chem |
| Coloray International |
LG Chem and Coloray International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LG Chem and Coloray International
The main advantage of trading using opposite LG Chem and Coloray International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LG Chem position performs unexpectedly, Coloray International 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 Coloray International will offset losses from the drop in Coloray International's long position.| LG Chem vs. Woori Technology Investment | LG Chem vs. Polaris Office Corp | LG Chem vs. Homecast CoLtd | LG Chem vs. DB Financial Investment |
| Coloray International vs. Taeyang Metal Industrial | Coloray International vs. Haitai Confectionery Foods | Coloray International vs. Namhwa Industrial Co | Coloray International vs. Seoyon Topmetal Co |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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