Correlation Between LegoChem Biosciences and Heungkuk Metaltech

Can any of the company-specific risk be diversified away by investing in both LegoChem Biosciences and Heungkuk Metaltech 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 LegoChem Biosciences and Heungkuk Metaltech into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between LegoChem Biosciences and Heungkuk Metaltech CoLtd, you can compare the effects of market volatilities on LegoChem Biosciences and Heungkuk Metaltech 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 LegoChem Biosciences with a short position of Heungkuk Metaltech. Check out your portfolio center. Please also check ongoing floating volatility patterns of LegoChem Biosciences and Heungkuk Metaltech.

Diversification Opportunities for LegoChem Biosciences and Heungkuk Metaltech

0.17

Correlation Coefficient

LegoChem Biosciences  Heungkuk Metaltech

Average diversification

The 3 months correlation between LegoChem and Heungkuk is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding LegoChem Biosciences and Heungkuk Metaltech CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Heungkuk Metaltech CoLtd and LegoChem Biosciences 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 LegoChem Biosciences are associated (or correlated) with Heungkuk Metaltech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Heungkuk Metaltech CoLtd has no effect on the direction of LegoChem Biosciences i.e., LegoChem Biosciences and Heungkuk Metaltech go up and down completely randomly.

Pair Corralation between LegoChem Biosciences and Heungkuk Metaltech

Assuming the 90 days trading horizon LegoChem Biosciences is expected to generate 2.39 times more return on investment than Heungkuk Metaltech. However, LegoChem Biosciences is 2.39 times more volatile than Heungkuk Metaltech CoLtd. It trades about 0.11 of its potential returns per unit of risk. Heungkuk Metaltech CoLtd is currently generating about 0.16 per unit of risk. If you would invest  8,780,000  in LegoChem Biosciences on September 12, 2024 and sell it today you would earn a total of  2,340,000  from holding LegoChem Biosciences or generate 26.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

LegoChem Biosciences  vs.  Heungkuk Metaltech CoLtd

LegoChem Biosciences

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in LegoChem Biosciences are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, LegoChem Biosciences sustained solid returns over the last few months and may actually be approaching a breakup point.

Heungkuk Metaltech CoLtd

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Heungkuk Metaltech CoLtd are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Heungkuk Metaltech sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with LegoChem Biosciences and Heungkuk Metaltech

The main advantage of trading using opposite LegoChem Biosciences and Heungkuk Metaltech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LegoChem Biosciences position performs unexpectedly, Heungkuk Metaltech 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 Heungkuk Metaltech will offset losses from the drop in Heungkuk Metaltech's long position.

The idea behind LegoChem Biosciences and Heungkuk Metaltech CoLtd 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.

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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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.