Correlation Between LG Chemicals and Essen Tech

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

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

Diversification Opportunities for LG Chemicals and Essen Tech

0.0

Correlation Coefficient

LG Chemicals  Essen Tech

Pay attention - limited upside

The 3 months correlation between 051910 and Essen is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding LG Chemicals and Essen Tech Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Essen Tech 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 Essen Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Essen Tech has no effect on the direction of LG Chemicals i.e., LG Chemicals and Essen Tech go up and down completely randomly.

Pair Corralation between LG Chemicals and Essen Tech

If you would invest  40,000,000  in LG Chemicals on February 5, 2024 and sell it today you would earn a total of  350,000  from holding LG Chemicals or generate 0.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

LG Chemicals  vs.  Essen Tech Co

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 June 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Essen Tech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Essen Tech Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Essen Tech 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 Essen Tech

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

The idea behind LG Chemicals and Essen Tech Co 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 Anywhere module to track or share privately all of your investments from the convenience of any device.