Correlation Between Kolon Plastics and LG Energy
Can any of the company-specific risk be diversified away by investing in both Kolon Plastics and LG Energy 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 Kolon Plastics and LG Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Kolon Plastics and LG Energy Solution, you can compare the effects of market volatilities on Kolon Plastics and LG Energy 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 Kolon Plastics with a short position of LG Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kolon Plastics and LG Energy.
Diversification Opportunities for Kolon Plastics and LG Energy
0.25 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Kolon and 373220 is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Kolon Plastics and LG Energy Solution in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LG Energy Solution and Kolon Plastics 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 Kolon Plastics are associated (or correlated) with LG Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LG Energy Solution has no effect on the direction of Kolon Plastics i.e., Kolon Plastics and LG Energy go up and down completely randomly.
Pair Corralation between Kolon Plastics and LG Energy
Assuming the 90 days trading horizon Kolon Plastics is expected to under-perform the LG Energy. But the stock apears to be less risky and, when comparing its historical volatility, Kolon Plastics is 1.42 times less risky than LG Energy. The stock trades about -0.04 of its potential returns per unit of risk. The LG Energy Solution is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 35,000,000 in LG Energy Solution on October 25, 2024 and sell it today you would earn a total of 1,000,000 from holding LG Energy Solution or generate 2.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Kolon Plastics vs. LG Energy Solution
Performance |
| Timeline |
| Kolon Plastics |
| LG Energy Solution |
Kolon Plastics and LG Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Kolon Plastics and LG Energy
The main advantage of trading using opposite Kolon Plastics and LG Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kolon Plastics position performs unexpectedly, LG Energy 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 Energy will offset losses from the drop in LG Energy's long position.| Kolon Plastics vs. Atinum Investment Co | Kolon Plastics vs. Korea Investment Holdings | Kolon Plastics vs. DB Financial Investment | Kolon Plastics vs. SV Investment |
| LG Energy vs. Lion Chemtech Co | LG Energy vs. PJ Metal Co | LG Energy vs. V One Tech Co | LG Energy vs. Raontech |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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