Correlation Between Chinyang Hold and LG Chemicals

Can any of the company-specific risk be diversified away by investing in both Chinyang Hold and LG Chemicals 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 Chinyang Hold and LG Chemicals into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Chinyang Hold and LG Chemicals, you can compare the effects of market volatilities on Chinyang Hold and LG Chemicals 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 Chinyang Hold with a short position of LG Chemicals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chinyang Hold and LG Chemicals.

Diversification Opportunities for Chinyang Hold and LG Chemicals

0.72

Correlation Coefficient

Chinyang Hold  LG Chemicals

Poor diversification

The 3 months correlation between Chinyang and 051910 is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Chinyang Hold and LG Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LG Chemicals and Chinyang Hold 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 Chinyang Hold are associated (or correlated) with LG Chemicals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LG Chemicals has no effect on the direction of Chinyang Hold i.e., Chinyang Hold and LG Chemicals go up and down completely randomly.

Pair Corralation between Chinyang Hold and LG Chemicals

Assuming the 90 days trading horizon Chinyang Hold is expected to generate 19.77 times less return on investment than LG Chemicals. But when comparing it to its historical volatility, Chinyang Hold is 3.99 times less risky than LG Chemicals. It trades about 0.02 of its potential returns per unit of risk. LG Chemicals is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  31,400,000  in LG Chemicals on July 2, 2024 and sell it today you would earn a total of  4,350,000  from holding LG Chemicals or generate 13.85% return on investment over 90 days.

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

Chinyang Hold  vs.  LG Chemicals

Chinyang Hold

Risk-Adjusted Performance

0 of 100

Very Weak

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

LG Chemicals

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in LG Chemicals are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, LG Chemicals is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Chinyang Hold and LG Chemicals

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

The idea behind Chinyang Hold and LG Chemicals 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.