Correlation Between Hyosung Chemical and LIG ES

Can any of the company-specific risk be diversified away by investing in both Hyosung Chemical and LIG ES 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 Hyosung Chemical and LIG ES into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Hyosung Chemical Corp and LIG ES SPAC, you can compare the effects of market volatilities on Hyosung Chemical and LIG ES 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 Hyosung Chemical with a short position of LIG ES. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hyosung Chemical and LIG ES.

Diversification Opportunities for Hyosung Chemical and LIG ES

0.2

Correlation Coefficient

Hyosung Chemical  LIG ES

Modest diversification

The 3 months correlation between Hyosung and LIG is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Hyosung Chemical Corp and LIG ES SPAC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LIG ES SPAC and Hyosung Chemical 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 Hyosung Chemical Corp are associated (or correlated) with LIG ES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LIG ES SPAC has no effect on the direction of Hyosung Chemical i.e., Hyosung Chemical and LIG ES go up and down completely randomly.

Pair Corralation between Hyosung Chemical and LIG ES

Assuming the 90 days trading horizon Hyosung Chemical Corp is expected to under-perform the LIG ES. But the stock apears to be less risky and, when comparing its historical volatility, Hyosung Chemical Corp is 1.07 times less risky than LIG ES. The stock trades about -0.06 of its potential returns per unit of risk. The LIG ES SPAC is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  718,000  in LIG ES SPAC on December 2, 2024 and sell it today you would lose (268,500) from holding LIG ES SPAC or give up 37.4% of portfolio value over 90 days.

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

Hyosung Chemical Corp  vs.  LIG ES SPAC

Hyosung Chemical Corp

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Hyosung Chemical Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hyosung Chemical may actually be approaching a critical reversion point that can send shares even higher in April 2025.

LIG ES SPAC

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in LIG ES SPAC are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, LIG ES sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hyosung Chemical and LIG ES

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

The idea behind Hyosung Chemical Corp and LIG ES SPAC 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..