Correlation Between Korea Computer and LG Chemicals
Can any of the company-specific risk be diversified away by investing in both Korea Computer 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 Korea Computer and LG Chemicals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Korea Computer and LG Chemicals, you can compare the effects of market volatilities on Korea Computer 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 Korea Computer with a short position of LG Chemicals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Korea Computer and LG Chemicals.
Diversification Opportunities for Korea Computer and LG Chemicals
0.21 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Korea and 051910 is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Korea Computer and LG Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LG Chemicals and Korea Computer 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 Korea Computer 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 Korea Computer i.e., Korea Computer and LG Chemicals go up and down completely randomly.
Pair Corralation between Korea Computer and LG Chemicals
Assuming the 90 days trading horizon Korea Computer is expected to generate 1.16 times more return on investment than LG Chemicals. However, Korea Computer is 1.16 times more volatile than LG Chemicals. It trades about 0.03 of its potential returns per unit of risk. LG Chemicals is currently generating about -0.06 per unit of risk. If you would invest 414,856 in Korea Computer on September 2, 2024 and sell it today you would earn a total of 83,144 from holding Korea Computer or generate 20.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Korea Computer vs. LG Chemicals
Performance |
| Timeline |
| Korea Computer |
| LG Chemicals |
Korea Computer and LG Chemicals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Korea Computer and LG Chemicals
The main advantage of trading using opposite Korea Computer and LG Chemicals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Korea Computer 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.| Korea Computer vs. DSC Investment | Korea Computer vs. EBEST Investment Securities | Korea Computer vs. Sangsangin Investment Securities | Korea Computer vs. Korea Investment Holdings |
| LG Chemicals vs. POSCO Holdings | LG Chemicals vs. Hanwha Solutions | LG Chemicals vs. Hyundai Steel | LG Chemicals vs. Ecopro 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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