Correlation Between Next Entertainment and LG Chemicals
Can any of the company-specific risk be diversified away by investing in both Next Entertainment 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 Next Entertainment and LG Chemicals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Next Entertainment World and LG Chemicals, you can compare the effects of market volatilities on Next Entertainment 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 Next Entertainment with a short position of LG Chemicals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Next Entertainment and LG Chemicals.
Diversification Opportunities for Next Entertainment and LG Chemicals
0.33 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Next and 051910 is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Next Entertainment World and LG Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LG Chemicals and Next Entertainment 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 Next Entertainment World 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 Next Entertainment i.e., Next Entertainment and LG Chemicals go up and down completely randomly.
Pair Corralation between Next Entertainment and LG Chemicals
Assuming the 90 days trading horizon Next Entertainment World is expected to under-perform the LG Chemicals. In addition to that, Next Entertainment is 1.17 times more volatile than LG Chemicals. It trades about -0.08 of its total potential returns per unit of risk. LG Chemicals is currently generating about -0.08 per unit of volatility. If you would invest 39,650,000 in LG Chemicals on August 25, 2024 and sell it today you would lose (9,850,000) from holding LG Chemicals or give up 24.84% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Next Entertainment World vs. LG Chemicals
Performance |
| Timeline |
| Next Entertainment World |
| LG Chemicals |
Next Entertainment and LG Chemicals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Next Entertainment and LG Chemicals
The main advantage of trading using opposite Next Entertainment and LG Chemicals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Next Entertainment 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.| Next Entertainment vs. ChipsMedia | Next Entertainment vs. Haesung Industrial Co | Next Entertainment vs. Busan Industrial Co | Next Entertainment vs. Visang Education |
| LG Chemicals vs. POSCO Holdings | LG Chemicals vs. Lotte Chemical Corp | LG Chemicals vs. Hyundai Steel | LG Chemicals vs. Dongkuk Steel Mill |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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