Correlation Between LG Chemicals and Tae Kwang

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

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

Diversification Opportunities for LG Chemicals and Tae Kwang

-0.19

Correlation Coefficient

LG Chemicals  Tae Kwang

Good diversification

The 3 months correlation between 051910 and Tae is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding LG Chemicals and Tae Kwang in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tae Kwang 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 Tae Kwang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tae Kwang has no effect on the direction of LG Chemicals i.e., LG Chemicals and Tae Kwang go up and down completely randomly.

Pair Corralation between LG Chemicals and Tae Kwang

Assuming the 90 days trading horizon LG Chemicals is expected to generate 4.84 times less return on investment than Tae Kwang. But when comparing it to its historical volatility, LG Chemicals is 1.18 times less risky than Tae Kwang. It trades about 0.03 of its potential returns per unit of risk. Tae Kwang is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  1,764,180  in Tae Kwang on December 24, 2024 and sell it today you would earn a total of  495,820  from holding Tae Kwang or generate 28.1% 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.  Tae Kwang

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.

Tae Kwang

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tae Kwang are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Tae Kwang sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with LG Chemicals and Tae Kwang

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

The idea behind LG Chemicals and Tae Kwang 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.

Check out your portfolio center.

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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.