Correlation Between Homecast CoLtd and LG Chem
Can any of the company-specific risk be diversified away by investing in both Homecast CoLtd and LG Chem 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 Homecast CoLtd and LG Chem into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Homecast CoLtd and LG Chem, you can compare the effects of market volatilities on Homecast CoLtd and LG Chem 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 Homecast CoLtd with a short position of LG Chem. Check out your portfolio center. Please also check ongoing floating volatility patterns of Homecast CoLtd and LG Chem.
Diversification Opportunities for Homecast CoLtd and LG Chem
0.13 | Correlation Coefficient |
Average diversification
The 3 months correlation between Homecast and 051915 is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Homecast CoLtd and LG Chem in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LG Chem and Homecast CoLtd 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 Homecast CoLtd are associated (or correlated) with LG Chem. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LG Chem has no effect on the direction of Homecast CoLtd i.e., Homecast CoLtd and LG Chem go up and down completely randomly.
Pair Corralation between Homecast CoLtd and LG Chem
Assuming the 90 days trading horizon Homecast CoLtd is expected to generate 1.1 times more return on investment than LG Chem. However, Homecast CoLtd is 1.1 times more volatile than LG Chem. It trades about -0.03 of its potential returns per unit of risk. LG Chem is currently generating about -0.13 per unit of risk. If you would invest 271,500 in Homecast CoLtd on August 29, 2024 and sell it today you would lose (9,000) from holding Homecast CoLtd or give up 3.31% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Homecast CoLtd vs. LG Chem
Performance |
| Timeline |
| Homecast CoLtd |
| LG Chem |
Homecast CoLtd and LG Chem Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Homecast CoLtd and LG Chem
The main advantage of trading using opposite Homecast CoLtd and LG Chem positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Homecast CoLtd position performs unexpectedly, LG Chem 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 Chem will offset losses from the drop in LG Chem's long position.| Homecast CoLtd vs. Ssangyong Materials Corp | Homecast CoLtd vs. MetaLabs Co | Homecast CoLtd vs. Iljin Materials Co | Homecast CoLtd vs. Kbi Metal Co |
| LG Chem vs. ECSTELECOM Co | LG Chem vs. Korea Air Svc | LG Chem vs. Ssangyong Information Communication | LG Chem vs. BNK Financial Group |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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