Correlation Between Alton Sports and LG Chem

Specify exactly 2 symbols:
Can any of the company-specific risk be diversified away by investing in both Alton Sports and LG Chem 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 Alton Sports and LG Chem into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alton Sports CoLtd and LG Chem, you can compare the effects of market volatilities on Alton Sports and LG Chem 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 Alton Sports with a short position of LG Chem. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alton Sports and LG Chem.

Diversification Opportunities for Alton Sports and LG Chem

0.81
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Alton and 051915 is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Alton Sports CoLtd and LG Chem in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LG Chem and Alton Sports 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 Alton Sports CoLtd are associated (or correlated) with LG Chem. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LG Chem has no effect on the direction of Alton Sports i.e., Alton Sports and LG Chem go up and down completely randomly.

Pair Corralation between Alton Sports and LG Chem

Assuming the 90 days trading horizon Alton Sports CoLtd is expected to under-perform the LG Chem. But the stock apears to be less risky and, when comparing its historical volatility, Alton Sports CoLtd is 2.06 times less risky than LG Chem. The stock trades about -0.23 of its potential returns per unit of risk. The LG Chem is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest  21,400,000  in LG Chem on September 12, 2024 and sell it today you would lose (3,450,000) from holding LG Chem or give up 16.12% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Alton Sports CoLtd  vs.  LG Chem

 Performance 
       Timeline  
Alton Sports CoLtd 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Alton Sports CoLtd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.
LG Chem 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days LG Chem has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Alton Sports and LG Chem Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Alton Sports and LG Chem

The main advantage of trading using opposite Alton Sports and LG Chem positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alton Sports position performs unexpectedly, LG Chem 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 Chem will offset losses from the drop in LG Chem's long position.
The idea behind Alton Sports CoLtd and LG Chem pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.

Other Complementary Tools

Analyst Advice
Analyst recommendations and target price estimates broken down by several categories
Portfolio Holdings
Check your current holdings and cash postion to detemine if your portfolio needs rebalancing
Portfolio Dashboard
Portfolio dashboard that provides centralized access to all your investments
Content Syndication
Quickly integrate customizable finance content to your own investment portal
Equity Analysis
Research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities