Correlation Between LegoChem Biosciences and Hanjoo Light

Can any of the company-specific risk be diversified away by investing in both LegoChem Biosciences and Hanjoo Light 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 LegoChem Biosciences and Hanjoo Light into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between LegoChem Biosciences and Hanjoo Light Metal, you can compare the effects of market volatilities on LegoChem Biosciences and Hanjoo Light 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 LegoChem Biosciences with a short position of Hanjoo Light. Check out your portfolio center. Please also check ongoing floating volatility patterns of LegoChem Biosciences and Hanjoo Light.

Diversification Opportunities for LegoChem Biosciences and Hanjoo Light

0.53

Correlation Coefficient

LegoChem Biosciences  Hanjoo Light

Very weak diversification

The 3 months correlation between LegoChem and Hanjoo is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding LegoChem Biosciences and Hanjoo Light Metal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hanjoo Light Metal and LegoChem Biosciences 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 LegoChem Biosciences are associated (or correlated) with Hanjoo Light. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hanjoo Light Metal has no effect on the direction of LegoChem Biosciences i.e., LegoChem Biosciences and Hanjoo Light go up and down completely randomly.

Pair Corralation between LegoChem Biosciences and Hanjoo Light

Assuming the 90 days trading horizon LegoChem Biosciences is expected to under-perform the Hanjoo Light. In addition to that, LegoChem Biosciences is 1.65 times more volatile than Hanjoo Light Metal. It trades about -0.03 of its total potential returns per unit of risk. Hanjoo Light Metal is currently generating about 0.01 per unit of volatility. If you would invest  72,300  in Hanjoo Light Metal on December 26, 2024 and sell it today you would earn a total of  100.00  from holding Hanjoo Light Metal or generate 0.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.28%
Values	Daily Returns

LegoChem Biosciences  vs.  Hanjoo Light Metal

LegoChem Biosciences

Risk-Adjusted Performance

Very Weak

Over the last 90 days LegoChem Biosciences has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, LegoChem Biosciences is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Hanjoo Light Metal

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hanjoo Light Metal has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Hanjoo Light is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with LegoChem Biosciences and Hanjoo Light

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

The idea behind LegoChem Biosciences and Hanjoo Light Metal 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.