Correlation Between LG Chemicals and Samsung Securities

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

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

Diversification Opportunities for LG Chemicals and Samsung Securities

-0.11

Correlation Coefficient

LG Chemicals  Samsung Securities

Good diversification

The 3 months correlation between 051910 and Samsung is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding LG Chemicals and Samsung Securities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Samsung Securities and LG Chemicals 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 LG Chemicals are associated (or correlated) with Samsung Securities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Samsung Securities has no effect on the direction of LG Chemicals i.e., LG Chemicals and Samsung Securities go up and down completely randomly.

Pair Corralation between LG Chemicals and Samsung Securities

Assuming the 90 days trading horizon LG Chemicals is expected to generate 2.33 times more return on investment than Samsung Securities. However, LG Chemicals is 2.33 times more volatile than Samsung Securities. It trades about 0.04 of its potential returns per unit of risk. Samsung Securities is currently generating about 0.07 per unit of risk. If you would invest  24,907,100  in LG Chemicals on December 30, 2024 and sell it today you would earn a total of  992,900  from holding LG Chemicals or generate 3.99% return on investment over 90 days.

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

LG Chemicals  vs.  Samsung Securities

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.

Samsung Securities

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Samsung Securities are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Samsung Securities is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with LG Chemicals and Samsung Securities

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

The idea behind LG Chemicals and Samsung Securities 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 Commodity Directory module to find actively traded commodities issued by global exchanges.