Correlation Between Keum Kang and LG Chemicals
Can any of the company-specific risk be diversified away by investing in both Keum Kang and LG 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 Keum Kang and LG Chemicals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Keum Kang Steel and LG Chemicals, you can compare the effects of market volatilities on Keum Kang and LG 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 Keum Kang with a short position of LG Chemicals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Keum Kang and LG Chemicals.
Diversification Opportunities for Keum Kang and LG Chemicals
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Keum and 051910 is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Keum Kang Steel and LG Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LG Chemicals and Keum Kang 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 Keum Kang Steel are associated (or correlated) with LG Chemicals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LG Chemicals has no effect on the direction of Keum Kang i.e., Keum Kang and LG Chemicals go up and down completely randomly.
Pair Corralation between Keum Kang and LG Chemicals
Assuming the 90 days trading horizon Keum Kang Steel is expected to generate 1.21 times more return on investment than LG Chemicals. However, Keum Kang is 1.21 times more volatile than LG Chemicals. It trades about -0.12 of its potential returns per unit of risk. LG Chemicals is currently generating about -0.15 per unit of risk. If you would invest 465,000 in Keum Kang Steel on September 1, 2024 and sell it today you would lose (44,000) from holding Keum Kang Steel or give up 9.46% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Keum Kang Steel vs. LG Chemicals
Performance |
| Timeline |
| Keum Kang Steel |
| LG Chemicals |
Keum Kang and LG Chemicals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Keum Kang and LG Chemicals
The main advantage of trading using opposite Keum Kang and LG Chemicals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Keum Kang position performs unexpectedly, LG 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 LG Chemicals will offset losses from the drop in LG Chemicals' long position.| Keum Kang vs. LG Chemicals | Keum Kang vs. POSCO Holdings | Keum Kang vs. Hanwha Solutions | Keum Kang vs. Lotte Chemical Corp |
| LG Chemicals vs. Korea Investment Holdings | LG Chemicals vs. INNOX Advanced Materials | LG Chemicals vs. Union Materials Corp | LG Chemicals vs. DB Financial Investment |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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