Correlation Between Dongjin Semichem and LG Chemicals

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

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

Diversification Opportunities for Dongjin Semichem and LG Chemicals

0.33

Correlation Coefficient

Dongjin Semichem  LG Chemicals

Weak diversification

The 3 months correlation between Dongjin and 051910 is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Dongjin Semichem Co and LG Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LG Chemicals and Dongjin Semichem 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 Dongjin Semichem Co 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 Dongjin Semichem i.e., Dongjin Semichem and LG Chemicals go up and down completely randomly.

Pair Corralation between Dongjin Semichem and LG Chemicals

Assuming the 90 days trading horizon Dongjin Semichem Co is expected to generate 1.11 times more return on investment than LG Chemicals. However, Dongjin Semichem is 1.11 times more volatile than LG Chemicals. It trades about 0.2 of its potential returns per unit of risk. LG Chemicals is currently generating about 0.04 per unit of risk. If you would invest  2,090,000  in Dongjin Semichem Co on December 30, 2024 and sell it today you would earn a total of  910,000  from holding Dongjin Semichem Co or generate 43.54% return on investment over 90 days.

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

Dongjin Semichem Co  vs.  LG Chemicals

Dongjin Semichem

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dongjin Semichem Co are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Dongjin Semichem sustained solid returns over the last few months and may actually be approaching a breakup point.

LG Chemicals

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in LG Chemicals are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, LG Chemicals may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Dongjin Semichem and LG Chemicals

The main advantage of trading using opposite Dongjin Semichem and LG Chemicals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dongjin Semichem 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 Dongjin Semichem Co 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.