Correlation Between Youngsin Metal and LG Chem

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

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

Diversification Opportunities for Youngsin Metal and LG Chem

0.3

Correlation Coefficient

Youngsin Metal  LG Chem

Weak diversification

The 3 months correlation between Youngsin and 051915 is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Youngsin Metal Industrial and LG Chem in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LG Chem and Youngsin Metal 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 Youngsin Metal Industrial are associated (or correlated) with LG Chem. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LG Chem has no effect on the direction of Youngsin Metal i.e., Youngsin Metal and LG Chem go up and down completely randomly.

Pair Corralation between Youngsin Metal and LG Chem

Assuming the 90 days trading horizon Youngsin Metal Industrial is expected to under-perform the LG Chem. But the stock apears to be less risky and, when comparing its historical volatility, Youngsin Metal Industrial is 1.3 times less risky than LG Chem. The stock trades about -0.14 of its potential returns per unit of risk. The LG Chem is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  12,330,000  in LG Chem on December 10, 2024 and sell it today you would lose (680,000) from holding LG Chem or give up 5.52% of portfolio value over 90 days.

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

Youngsin Metal Industrial  vs.  LG Chem

Youngsin Metal Industrial

Risk-Adjusted Performance

Very Weak

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

LG Chem

Risk-Adjusted Performance

Very Weak

Over the last 90 days LG Chem 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 April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Youngsin Metal and LG Chem

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

The idea behind Youngsin Metal Industrial and LG Chem 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.