Correlation Between LG Chem and Kosdaq Composite
Can any of the company-specific risk be diversified away by investing in both LG Chem and Kosdaq Composite 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 Kosdaq Composite into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LG Chem and Kosdaq Composite Index, you can compare the effects of market volatilities on LG Chem and Kosdaq Composite 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 Kosdaq Composite. Check out your portfolio center. Please also check ongoing floating volatility patterns of LG Chem and Kosdaq Composite.
Diversification Opportunities for LG Chem and Kosdaq Composite
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between 051915 and Kosdaq is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding LG Chem and Kosdaq Composite Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kosdaq Composite Index 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 Kosdaq Composite. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kosdaq Composite Index has no effect on the direction of LG Chem i.e., LG Chem and Kosdaq Composite go up and down completely randomly.
Pair Corralation between LG Chem and Kosdaq Composite
Assuming the 90 days trading horizon LG Chem is expected to generate 1.72 times more return on investment than Kosdaq Composite. However, LG Chem is 1.72 times more volatile than Kosdaq Composite Index. It trades about -0.05 of its potential returns per unit of risk. Kosdaq Composite Index is currently generating about -0.13 per unit of risk. If you would invest 22,250,000 in LG Chem on August 31, 2024 and sell it today you would lose (1,900,000) from holding LG Chem or give up 8.54% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 98.31% |
| Values | Daily Returns |
LG Chem vs. Kosdaq Composite Index
Performance |
| Timeline |
LG Chem and Kosdaq Composite Volatility Contrast
Predicted Return Density |
| Returns |
LG Chem
Pair trading matchups for LG Chem
Kosdaq Composite Index
Pair trading matchups for Kosdaq Composite
Pair Trading with LG Chem and Kosdaq Composite
The main advantage of trading using opposite LG Chem and Kosdaq Composite positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LG Chem position performs unexpectedly, Kosdaq Composite 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 Kosdaq Composite will offset losses from the drop in Kosdaq Composite's long position.| LG Chem vs. Bohae Brewery | LG Chem vs. Asiana Airlines | LG Chem vs. Seoam Machinery Industry | LG Chem vs. Samick Musical Instruments |
| Kosdaq Composite vs. Konan Technology | Kosdaq Composite vs. Korea Petro Chemical | Kosdaq Composite vs. RFTech Co | Kosdaq Composite vs. Yura Tech 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
Other Complementary Tools
| Portfolio Volatility Check portfolio volatility and analyze historical return density to properly model market risk | |
| Portfolio Rebalancing Analyze risk-adjusted returns against different time horizons to find asset-allocation targets | |
| Investing Opportunities Build portfolios using our predefined set of ideas and optimize them against your investing preferences | |
| Performance Analysis Check effects of mean-variance optimization against your current asset allocation | |
| Cryptocurrency Center Build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency |