Correlation Between LG Electronics and Daewon Chemical
Can any of the company-specific risk be diversified away by investing in both LG Electronics and Daewon Chemical 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 Electronics and Daewon Chemical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LG Electronics and Daewon Chemical Co, you can compare the effects of market volatilities on LG Electronics and Daewon Chemical 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 Electronics with a short position of Daewon Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of LG Electronics and Daewon Chemical.
Diversification Opportunities for LG Electronics and Daewon Chemical
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between 066570 and Daewon is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding LG Electronics and Daewon Chemical Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daewon Chemical and LG Electronics 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 Electronics are associated (or correlated) with Daewon Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daewon Chemical has no effect on the direction of LG Electronics i.e., LG Electronics and Daewon Chemical go up and down completely randomly.
Pair Corralation between LG Electronics and Daewon Chemical
Assuming the 90 days trading horizon LG Electronics is expected to generate 31.98 times less return on investment than Daewon Chemical. But when comparing it to its historical volatility, LG Electronics is 5.36 times less risky than Daewon Chemical. It trades about 0.01 of its potential returns per unit of risk. Daewon Chemical Co is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 105,500 in Daewon Chemical Co on September 1, 2024 and sell it today you would earn a total of 9,700 from holding Daewon Chemical Co or generate 9.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
LG Electronics vs. Daewon Chemical Co
Performance |
| Timeline |
| LG Electronics |
| Daewon Chemical |
LG Electronics and Daewon Chemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LG Electronics and Daewon Chemical
The main advantage of trading using opposite LG Electronics and Daewon Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LG Electronics position performs unexpectedly, Daewon Chemical 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 Daewon Chemical will offset losses from the drop in Daewon Chemical's long position.| LG Electronics vs. AptaBio Therapeutics | LG Electronics vs. Daewoo SBI SPAC | LG Electronics vs. Dream Security co | LG Electronics vs. Microfriend |
| Daewon Chemical vs. LG Electronics | Daewon Chemical vs. Daedong Metals Co | Daewon Chemical vs. Choil Aluminum | Daewon Chemical vs. Samji Electronics 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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