Correlation Between Orbitech and LG Chemicals

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

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

Diversification Opportunities for Orbitech and LG Chemicals

0.12

Correlation Coefficient

Orbitech  LG Chemicals

Average diversification

The 3 months correlation between Orbitech and 051910 is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Orbitech Co and LG Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LG Chemicals and Orbitech 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 Orbitech 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 Orbitech i.e., Orbitech and LG Chemicals go up and down completely randomly.

Pair Corralation between Orbitech and LG Chemicals

Assuming the 90 days trading horizon Orbitech Co is expected to generate 1.1 times more return on investment than LG Chemicals. However, Orbitech is 1.1 times more volatile than LG Chemicals. It trades about 0.02 of its potential returns per unit of risk. LG Chemicals is currently generating about -0.06 per unit of risk. If you would invest  239,500  in Orbitech Co on August 31, 2024 and sell it today you would earn a total of  3,000  from holding Orbitech Co or generate 1.25% return on investment over 90 days.

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

Orbitech Co  vs.  LG Chemicals

Orbitech

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Orbitech Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Orbitech 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

0 of 100

Very Weak

Over the last 90 days LG Chemicals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Orbitech and LG Chemicals

The main advantage of trading using opposite Orbitech and LG Chemicals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Orbitech 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 Orbitech 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.