Correlation Between LG Chem and Young Poong

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

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

Diversification Opportunities for LG Chem and Young Poong

-0.54

Correlation Coefficient

LG Chem  Young Poong

Excellent diversification

The 3 months correlation between 051915 and Young is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding LG Chem and Young Poong Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Young Poong Corp and LG Chem 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 Chem are associated (or correlated) with Young Poong. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Young Poong Corp has no effect on the direction of LG Chem i.e., LG Chem and Young Poong go up and down completely randomly.

Pair Corralation between LG Chem and Young Poong

Assuming the 90 days trading horizon LG Chem is expected to under-perform the Young Poong. In addition to that, LG Chem is 1.51 times more volatile than Young Poong Corp. It trades about -0.03 of its total potential returns per unit of risk. Young Poong Corp is currently generating about 0.0 per unit of volatility. If you would invest  39,141,300  in Young Poong Corp on October 10, 2024 and sell it today you would lose (141,300) from holding Young Poong Corp or give up 0.36% of portfolio value over 90 days.

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

LG Chem  vs.  Young Poong Corp

LG Chem

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LG Chem 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.

Young Poong Corp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Young Poong Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Young Poong may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with LG Chem and Young Poong

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

The idea behind LG Chem and Young Poong Corp 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.