Correlation Between Lion Chemtech and Kakao Games

Can any of the company-specific risk be diversified away by investing in both Lion Chemtech and Kakao Games 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 Lion Chemtech and Kakao Games into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Lion Chemtech Co and Kakao Games Corp, you can compare the effects of market volatilities on Lion Chemtech and Kakao Games 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 Lion Chemtech with a short position of Kakao Games. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lion Chemtech and Kakao Games.

Diversification Opportunities for Lion Chemtech and Kakao Games

-0.34

Correlation Coefficient

Lion Chemtech  Kakao Games

Very good diversification

The 3 months correlation between Lion and Kakao is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Lion Chemtech Co and Kakao Games Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kakao Games Corp and Lion Chemtech 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 Lion Chemtech Co are associated (or correlated) with Kakao Games. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kakao Games Corp has no effect on the direction of Lion Chemtech i.e., Lion Chemtech and Kakao Games go up and down completely randomly.

Pair Corralation between Lion Chemtech and Kakao Games

Assuming the 90 days trading horizon Lion Chemtech Co is expected to generate 1.15 times more return on investment than Kakao Games. However, Lion Chemtech is 1.15 times more volatile than Kakao Games Corp. It trades about 0.08 of its potential returns per unit of risk. Kakao Games Corp is currently generating about 0.01 per unit of risk. If you would invest  221,500  in Lion Chemtech Co on August 31, 2024 and sell it today you would earn a total of  27,500  from holding Lion Chemtech Co or generate 12.42% return on investment over 90 days.

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

Lion Chemtech Co  vs.  Kakao Games Corp

Lion Chemtech

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Lion Chemtech Co are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Lion Chemtech sustained solid returns over the last few months and may actually be approaching a breakup point.

Kakao Games Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kakao Games Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Kakao Games is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Lion Chemtech and Kakao Games

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

The idea behind Lion Chemtech Co and Kakao Games Corp 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.