Correlation Between WONIK Materials and LG Chemicals
Can any of the company-specific risk be diversified away by investing in both WONIK Materials 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 WONIK Materials and LG Chemicals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between WONIK Materials CoLtd and LG Chemicals, you can compare the effects of market volatilities on WONIK Materials 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 WONIK Materials with a short position of LG Chemicals. Check out your portfolio center. Please also check ongoing floating volatility patterns of WONIK Materials and LG Chemicals.
Diversification Opportunities for WONIK Materials and LG Chemicals
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between WONIK and 051910 is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding WONIK Materials CoLtd and LG Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LG Chemicals and WONIK Materials 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 WONIK Materials CoLtd 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 WONIK Materials i.e., WONIK Materials and LG Chemicals go up and down completely randomly.
Pair Corralation between WONIK Materials and LG Chemicals
Assuming the 90 days trading horizon WONIK Materials CoLtd is expected to generate 0.83 times more return on investment than LG Chemicals. However, WONIK Materials CoLtd is 1.2 times less risky than LG Chemicals. It trades about 0.21 of its potential returns per unit of risk. LG Chemicals is currently generating about -0.13 per unit of risk. If you would invest 1,768,541 in WONIK Materials CoLtd on October 24, 2024 and sell it today you would earn a total of 133,459 from holding WONIK Materials CoLtd or generate 7.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
WONIK Materials CoLtd vs. LG Chemicals
Performance |
| Timeline |
| WONIK Materials CoLtd |
| LG Chemicals |
WONIK Materials and LG Chemicals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WONIK Materials and LG Chemicals
The main advantage of trading using opposite WONIK Materials and LG Chemicals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WONIK Materials 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.| WONIK Materials vs. LG Chemicals | WONIK Materials vs. POSCO Holdings | WONIK Materials vs. Hanwha Solutions | WONIK Materials vs. Lotte Chemical Corp |
| LG Chemicals vs. KT Submarine Telecom | LG Chemicals vs. GS Retail Co | LG Chemicals vs. Pan Entertainment Co | LG Chemicals vs. MEDIANA CoLtd |
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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