Correlation Between Daechang Steel and LG Chemicals
Can any of the company-specific risk be diversified away by investing in both Daechang Steel 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 Daechang Steel and LG Chemicals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Daechang Steel Co and LG Chemicals, you can compare the effects of market volatilities on Daechang Steel 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 Daechang Steel with a short position of LG Chemicals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Daechang Steel and LG Chemicals.
Diversification Opportunities for Daechang Steel and LG Chemicals
0.19 | Correlation Coefficient |
Average diversification
The 3 months correlation between Daechang and 051910 is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Daechang Steel Co and LG Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LG Chemicals and Daechang Steel 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 Daechang Steel 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 Daechang Steel i.e., Daechang Steel and LG Chemicals go up and down completely randomly.
Pair Corralation between Daechang Steel and LG Chemicals
Assuming the 90 days trading horizon Daechang Steel Co is expected to generate 0.62 times more return on investment than LG Chemicals. However, Daechang Steel Co is 1.62 times less risky than LG Chemicals. It trades about 0.05 of its potential returns per unit of risk. LG Chemicals is currently generating about -0.15 per unit of risk. If you would invest 198,930 in Daechang Steel Co on November 3, 2024 and sell it today you would earn a total of 6,070 from holding Daechang Steel Co or generate 3.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Daechang Steel Co vs. LG Chemicals
Performance |
| Timeline |
| Daechang Steel |
| LG Chemicals |
Daechang Steel and LG Chemicals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Daechang Steel and LG Chemicals
The main advantage of trading using opposite Daechang Steel and LG Chemicals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Daechang Steel 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.| Daechang Steel vs. Daol Investment Securities | Daechang Steel vs. Golden Bridge Investment | Daechang Steel vs. Korea Shipbuilding Offshore | Daechang Steel vs. Coloray International Investment |
| LG Chemicals vs. Samhyun Steel Co | LG Chemicals vs. INSUN Environmental New | LG Chemicals vs. Nature and Environment | LG Chemicals vs. Hankook Steel 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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