Correlation Between LG Chemicals and MEDIANA CoLtd

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

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

Diversification Opportunities for LG Chemicals and MEDIANA CoLtd

0.41

Correlation Coefficient

LG Chemicals  MEDIANA CoLtd

Very weak diversification

The 3 months correlation between 051910 and MEDIANA is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding LG Chemicals and MEDIANA CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MEDIANA CoLtd 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 MEDIANA CoLtd. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MEDIANA CoLtd has no effect on the direction of LG Chemicals i.e., LG Chemicals and MEDIANA CoLtd go up and down completely randomly.

Pair Corralation between LG Chemicals and MEDIANA CoLtd

Assuming the 90 days trading horizon LG Chemicals is expected to generate 1.99 times more return on investment than MEDIANA CoLtd. However, LG Chemicals is 1.99 times more volatile than MEDIANA CoLtd. It trades about 0.07 of its potential returns per unit of risk. MEDIANA CoLtd is currently generating about 0.09 per unit of risk. If you would invest  24,700,000  in LG Chemicals on December 27, 2024 and sell it today you would earn a total of  2,500,000  from holding LG Chemicals or generate 10.12% return on investment over 90 days.

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

LG Chemicals  vs.  MEDIANA CoLtd

LG Chemicals

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in LG Chemicals are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, LG Chemicals sustained solid returns over the last few months and may actually be approaching a breakup point.

MEDIANA CoLtd

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in MEDIANA CoLtd are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, MEDIANA CoLtd may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with LG Chemicals and MEDIANA CoLtd

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

The idea behind LG Chemicals and MEDIANA CoLtd 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.