Correlation Between Daejung Chemicals and LB Investment
Can any of the company-specific risk be diversified away by investing in both Daejung Chemicals and LB Investment 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 Daejung Chemicals and LB Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Daejung Chemicals Metals and LB Investment, you can compare the effects of market volatilities on Daejung Chemicals and LB Investment 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 Daejung Chemicals with a short position of LB Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Daejung Chemicals and LB Investment.
Diversification Opportunities for Daejung Chemicals and LB Investment
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Daejung and 309960 is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Daejung Chemicals Metals and LB Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LB Investment and Daejung Chemicals 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 Daejung Chemicals Metals are associated (or correlated) with LB Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LB Investment has no effect on the direction of Daejung Chemicals i.e., Daejung Chemicals and LB Investment go up and down completely randomly.
Pair Corralation between Daejung Chemicals and LB Investment
Assuming the 90 days trading horizon Daejung Chemicals Metals is expected to generate 0.59 times more return on investment than LB Investment. However, Daejung Chemicals Metals is 1.69 times less risky than LB Investment. It trades about -0.01 of its potential returns per unit of risk. LB Investment is currently generating about -0.04 per unit of risk. If you would invest 1,600,009 in Daejung Chemicals Metals on August 25, 2024 and sell it today you would lose (320,009) from holding Daejung Chemicals Metals or give up 20.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 83.88% |
| Values | Daily Returns |
Daejung Chemicals Metals vs. LB Investment
Performance |
| Timeline |
| Daejung Chemicals Metals |
| LB Investment |
Daejung Chemicals and LB Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Daejung Chemicals and LB Investment
The main advantage of trading using opposite Daejung Chemicals and LB Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Daejung Chemicals position performs unexpectedly, LB Investment 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 LB Investment will offset losses from the drop in LB Investment's long position.| Daejung Chemicals vs. LG Chem | Daejung Chemicals vs. Chunbo Co | Daejung Chemicals vs. Hyosung Chemical Corp | Daejung Chemicals vs. LIG ES SPAC |
| LB Investment vs. BIT Computer Co | LB Investment vs. Lotte Data Communication | LB Investment vs. Shinsegae Information Communication | LB Investment vs. LG Display 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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