Correlation Between Sam Yang and LG Chemicals

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

Diversification Opportunities for Sam Yang and LG Chemicals

Sam051910Diversified AwaySam051910Diversified Away100%
-0.64
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Sam and 051910 is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Sam Yang Foods and LG Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LG Chemicals and Sam Yang 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 Sam Yang Foods 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 Sam Yang i.e., Sam Yang and LG Chemicals go up and down completely randomly.

Pair Corralation between Sam Yang and LG Chemicals

Assuming the 90 days trading horizon Sam Yang Foods is expected to generate 1.23 times more return on investment than LG Chemicals. However, Sam Yang is 1.23 times more volatile than LG Chemicals. It trades about 0.16 of its potential returns per unit of risk. LG Chemicals is currently generating about -0.1 per unit of risk. If you would invest  53,800,000  in Sam Yang Foods on September 22, 2024 and sell it today you would earn a total of  21,000,000  from holding Sam Yang Foods or generate 39.03% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Sam Yang Foods  vs.  LG Chemicals

 Performance 
JavaScript chart by amCharts 3.21.15OctNovDec -20-100102030
JavaScript chart by amCharts 3.21.15003230 051910
       Timeline  
Sam Yang Foods 

Risk-Adjusted Performance

12 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Sam Yang Foods are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Sam Yang sustained solid returns over the last few months and may actually be approaching a breakup point.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec500,000550,000600,000650,000700,000750,000
LG Chemicals 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days LG Chemicals 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.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec260,000280,000300,000320,000340,000360,000

Sam Yang and LG Chemicals Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-10.7-8.02-5.33-2.64-0.04482.895.848.7811.72 0.010.020.030.04
JavaScript chart by amCharts 3.21.15003230 051910
       Returns  

Pair Trading with Sam Yang and LG Chemicals

The main advantage of trading using opposite Sam Yang and LG Chemicals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sam Yang 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 Sam Yang Foods 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.

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