Correlation Between Tae Kyung and LG Uplus

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

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

Diversification Opportunities for Tae Kyung and LG Uplus

-0.18

Correlation Coefficient

Tae Kyung  LG Uplus

Good diversification

The 3 months correlation between Tae and 032640 is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Tae Kyung Chemical and LG Uplus in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LG Uplus and Tae Kyung 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 Tae Kyung Chemical are associated (or correlated) with LG Uplus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LG Uplus has no effect on the direction of Tae Kyung i.e., Tae Kyung and LG Uplus go up and down completely randomly.

Pair Corralation between Tae Kyung and LG Uplus

Assuming the 90 days trading horizon Tae Kyung Chemical is expected to generate 2.0 times more return on investment than LG Uplus. However, Tae Kyung is 2.0 times more volatile than LG Uplus. It trades about 0.01 of its potential returns per unit of risk. LG Uplus is currently generating about 0.01 per unit of risk. If you would invest  1,113,062  in Tae Kyung Chemical on October 4, 2024 and sell it today you would earn a total of  8,938  from holding Tae Kyung Chemical or generate 0.8% return on investment over 90 days.

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

Tae Kyung Chemical  vs.  LG Uplus

Tae Kyung Chemical

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Tae Kyung Chemical are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Tae Kyung may actually be approaching a critical reversion point that can send shares even higher in February 2025.

LG Uplus

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in LG Uplus are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, LG Uplus may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Tae Kyung and LG Uplus

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

The idea behind Tae Kyung Chemical and LG Uplus 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.