Correlation Between LS Materials and CJ Cheiljedang
Can any of the company-specific risk be diversified away by investing in both LS Materials and CJ Cheiljedang 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 LS Materials and CJ Cheiljedang into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LS Materials and CJ Cheiljedang, you can compare the effects of market volatilities on LS Materials and CJ Cheiljedang 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 LS Materials with a short position of CJ Cheiljedang. Check out your portfolio center. Please also check ongoing floating volatility patterns of LS Materials and CJ Cheiljedang.
Diversification Opportunities for LS Materials and CJ Cheiljedang
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between 417200 and 097950 is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding LS Materials and CJ Cheiljedang in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CJ Cheiljedang and LS Materials 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 LS Materials are associated (or correlated) with CJ Cheiljedang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CJ Cheiljedang has no effect on the direction of LS Materials i.e., LS Materials and CJ Cheiljedang go up and down completely randomly.
Pair Corralation between LS Materials and CJ Cheiljedang
Assuming the 90 days trading horizon LS Materials is expected to under-perform the CJ Cheiljedang. In addition to that, LS Materials is 1.09 times more volatile than CJ Cheiljedang. It trades about -0.48 of its total potential returns per unit of risk. CJ Cheiljedang is currently generating about -0.09 per unit of volatility. If you would invest 27,850,000 in CJ Cheiljedang on September 3, 2024 and sell it today you would lose (1,500,000) from holding CJ Cheiljedang or give up 5.39% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
LS Materials vs. CJ Cheiljedang
Performance |
| Timeline |
| LS Materials |
| CJ Cheiljedang |
LS Materials and CJ Cheiljedang Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LS Materials and CJ Cheiljedang
The main advantage of trading using opposite LS Materials and CJ Cheiljedang positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LS Materials position performs unexpectedly, CJ Cheiljedang 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 CJ Cheiljedang will offset losses from the drop in CJ Cheiljedang's long position.| LS Materials vs. Samsung Electronics Co | LS Materials vs. Samsung Electronics Co | LS Materials vs. LG Energy Solution | LS Materials vs. SK Hynix |
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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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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