Correlation Between LG Energy and LG Chemicals
Can any of the company-specific risk be diversified away by investing in both LG Energy 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 LG Energy and LG Chemicals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LG Energy Solution and LG Chemicals, you can compare the effects of market volatilities on LG Energy 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 LG Energy with a short position of LG Chemicals. Check out your portfolio center. Please also check ongoing floating volatility patterns of LG Energy and LG Chemicals.
Diversification Opportunities for LG Energy and LG Chemicals
0.49 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between 373220 and 051910 is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding LG Energy Solution and LG Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LG Chemicals and LG Energy 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 LG Energy Solution 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 LG Energy i.e., LG Energy and LG Chemicals go up and down completely randomly.
Pair Corralation between LG Energy and LG Chemicals
Assuming the 90 days trading horizon LG Energy Solution is expected to generate 1.13 times more return on investment than LG Chemicals. However, LG Energy is 1.13 times more volatile than LG Chemicals. It trades about 0.04 of its potential returns per unit of risk. LG Chemicals is currently generating about -0.08 per unit of risk. If you would invest 36,450,000 in LG Energy Solution on August 25, 2024 and sell it today you would earn a total of 4,050,000 from holding LG Energy Solution or generate 11.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
LG Energy Solution vs. LG Chemicals
Performance |
| Timeline |
| LG Energy Solution |
| LG Chemicals |
LG Energy and LG Chemicals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LG Energy and LG Chemicals
The main advantage of trading using opposite LG Energy and LG Chemicals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LG Energy 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.| LG Energy vs. Hana Financial | LG Energy vs. Dongbu Insurance Co | LG Energy vs. Jeju Bank | LG Energy vs. Ssangyong Information Communication |
| 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 Transaction History module to view history of all your transactions and understand their impact on performance.
Other Complementary Tools
| Risk-Return Analysis View associations between returns expected from investment and the risk you assume | |
| AI Portfolio Architect Use AI to generate optimal portfolios and find profitable investment opportunities | |
| Transaction History View history of all your transactions and understand their impact on performance | |
| Balance Of Power Check stock momentum by analyzing Balance Of Power indicator and other technical ratios | |
| Bollinger Bands Use Bollinger Bands indicator to analyze target price for a given investing horizon |