Correlation Between LG Chemicals and Cherrybro CoLtd

Can any of the company-specific risk be diversified away by investing in both LG Chemicals and Cherrybro 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 Cherrybro 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 Cherrybro coLtd, you can compare the effects of market volatilities on LG Chemicals and Cherrybro 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 Cherrybro CoLtd. Check out your portfolio center. Please also check ongoing floating volatility patterns of LG Chemicals and Cherrybro CoLtd.

Diversification Opportunities for LG Chemicals and Cherrybro CoLtd

-0.24

Correlation Coefficient

LG Chemicals  Cherrybro CoLtd

Very good diversification

The 3 months correlation between 051910 and Cherrybro is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding LG Chemicals and Cherrybro coLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cherrybro 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 Cherrybro CoLtd. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cherrybro coLtd has no effect on the direction of LG Chemicals i.e., LG Chemicals and Cherrybro CoLtd go up and down completely randomly.

Pair Corralation between LG Chemicals and Cherrybro CoLtd

Assuming the 90 days trading horizon LG Chemicals is expected to under-perform the Cherrybro CoLtd. In addition to that, LG Chemicals is 1.32 times more volatile than Cherrybro coLtd. It trades about -0.18 of its total potential returns per unit of risk. Cherrybro coLtd is currently generating about 0.13 per unit of volatility. If you would invest  78,900  in Cherrybro coLtd on October 11, 2024 and sell it today you would earn a total of  2,900  from holding Cherrybro coLtd or generate 3.68% 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.  Cherrybro coLtd

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 weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Cherrybro coLtd

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Cherrybro coLtd are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Cherrybro CoLtd 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 Cherrybro CoLtd

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

The idea behind LG Chemicals and Cherrybro 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.