Correlation Between SH Energy and LG Electronics
Can any of the company-specific risk be diversified away by investing in both SH Energy and LG Electronics 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 SH Energy and LG Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SH Energy Chemical and LG Electronics, you can compare the effects of market volatilities on SH Energy and LG Electronics 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 SH Energy with a short position of LG Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of SH Energy and LG Electronics.
Diversification Opportunities for SH Energy and LG Electronics
0.27 | Correlation Coefficient |
Modest diversification
The 3 months correlation between 002360 and 066570 is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding SH Energy Chemical and LG Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LG Electronics and SH Energy 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 SH Energy Chemical are associated (or correlated) with LG Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LG Electronics has no effect on the direction of SH Energy i.e., SH Energy and LG Electronics go up and down completely randomly.
Pair Corralation between SH Energy and LG Electronics
Assuming the 90 days trading horizon SH Energy Chemical is expected to under-perform the LG Electronics. In addition to that, SH Energy is 1.27 times more volatile than LG Electronics. It trades about -0.03 of its total potential returns per unit of risk. LG Electronics is currently generating about 0.01 per unit of volatility. If you would invest 8,463,283 in LG Electronics on September 24, 2024 and sell it today you would earn a total of 156,717 from holding LG Electronics or generate 1.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
SH Energy Chemical vs. LG Electronics
Performance |
| Timeline |
| SH Energy Chemical |
| LG Electronics |
SH Energy and LG Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SH Energy and LG Electronics
The main advantage of trading using opposite SH Energy and LG Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SH Energy position performs unexpectedly, LG Electronics 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 LG Electronics will offset losses from the drop in LG Electronics' long position.| SH Energy vs. Koh Young Technology | SH Energy vs. Koryo Credit Information | SH Energy vs. KakaoBank Corp | SH Energy vs. KB Financial Group |
| LG Electronics vs. MetaLabs Co | LG Electronics vs. Lotte Fine Chemical | LG Electronics vs. Heungkuk Metaltech CoLtd | LG Electronics vs. SH Energy Chemical |
Check out your portfolio center.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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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