Correlation Between Tplex and LG Chemicals
Can any of the company-specific risk be diversified away by investing in both Tplex 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 Tplex and LG Chemicals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tplex Co and LG Chemicals, you can compare the effects of market volatilities on Tplex 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 Tplex with a short position of LG Chemicals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tplex and LG Chemicals.
Diversification Opportunities for Tplex and LG Chemicals
-0.04 | Correlation Coefficient |
Good diversification
The 3 months correlation between Tplex and 051910 is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Tplex Co and LG Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LG Chemicals and Tplex 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 Tplex Co 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 Tplex i.e., Tplex and LG Chemicals go up and down completely randomly.
Pair Corralation between Tplex and LG Chemicals
Assuming the 90 days trading horizon Tplex Co is expected to generate 0.74 times more return on investment than LG Chemicals. However, Tplex Co is 1.35 times less risky than LG Chemicals. It trades about 0.1 of its potential returns per unit of risk. LG Chemicals is currently generating about -0.02 per unit of risk. If you would invest 296,000 in Tplex Co on November 1, 2024 and sell it today you would earn a total of 9,000 from holding Tplex Co or generate 3.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Tplex Co vs. LG Chemicals
Performance |
| Timeline |
| Tplex |
| LG Chemicals |
Tplex and LG Chemicals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tplex and LG Chemicals
The main advantage of trading using opposite Tplex and LG Chemicals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tplex 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.| Tplex vs. LG Chemicals | Tplex vs. POSCO Holdings | Tplex vs. Hanwha Solutions | Tplex vs. Lotte Chemical Corp |
| LG Chemicals vs. Sangsin Energy Display | LG Chemicals vs. Dongil Metal Co | LG Chemicals vs. LG Display Co | LG Chemicals vs. Kukil Metal 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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