Correlation Between LG Chemicals and Hansol Chemica
Can any of the company-specific risk be diversified away by investing in both LG Chemicals and Hansol Chemica 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 Chemicals and Hansol Chemica into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LG Chemicals and Hansol Chemica, you can compare the effects of market volatilities on LG Chemicals and Hansol Chemica 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 Chemicals with a short position of Hansol Chemica. Check out your portfolio center. Please also check ongoing floating volatility patterns of LG Chemicals and Hansol Chemica.
Diversification Opportunities for LG Chemicals and Hansol Chemica
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between 051910 and Hansol is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding LG Chemicals and Hansol Chemica in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hansol Chemica and LG Chemicals 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 Chemicals are associated (or correlated) with Hansol Chemica. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hansol Chemica has no effect on the direction of LG Chemicals i.e., LG Chemicals and Hansol Chemica go up and down completely randomly.
Pair Corralation between LG Chemicals and Hansol Chemica
Assuming the 90 days trading horizon LG Chemicals is expected to generate 0.98 times more return on investment than Hansol Chemica. However, LG Chemicals is 1.02 times less risky than Hansol Chemica. It trades about -0.1 of its potential returns per unit of risk. Hansol Chemica is currently generating about -0.13 per unit of risk. If you would invest 32,050,000 in LG Chemicals on September 12, 2024 and sell it today you would lose (5,800,000) from holding LG Chemicals or give up 18.1% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 98.31% |
Values | Daily Returns |
LG Chemicals vs. Hansol Chemica
Performance |
Timeline |
LG Chemicals |
Hansol Chemica |
LG Chemicals and Hansol Chemica Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with LG Chemicals and Hansol Chemica
The main advantage of trading using opposite LG Chemicals and Hansol Chemica positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LG Chemicals position performs unexpectedly, Hansol Chemica 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 Hansol Chemica will offset losses from the drop in Hansol Chemica's long position.LG Chemicals vs. POSCO Holdings | LG Chemicals vs. Hanwha Solutions | LG Chemicals vs. Lotte Chemical Corp | LG Chemicals vs. Hyundai Steel |
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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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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