Correlation Between Samsung Electronics and LG Electronics
Can any of the company-specific risk be diversified away by investing in both Samsung Electronics 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 Samsung Electronics and LG Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Samsung Electronics Co and LG Electronics, you can compare the effects of market volatilities on Samsung Electronics 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 Samsung Electronics with a short position of LG Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Samsung Electronics and LG Electronics.
Diversification Opportunities for Samsung Electronics and LG Electronics
0.43 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Samsung and 066570 is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Samsung Electronics Co and LG Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LG Electronics and Samsung Electronics 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 Samsung Electronics Co 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 Samsung Electronics i.e., Samsung Electronics and LG Electronics go up and down completely randomly.
Pair Corralation between Samsung Electronics and LG Electronics
Assuming the 90 days trading horizon Samsung Electronics is expected to generate 1.68 times less return on investment than LG Electronics. In addition to that, Samsung Electronics is 2.04 times more volatile than LG Electronics. It trades about 0.02 of its total potential returns per unit of risk. LG Electronics is currently generating about 0.07 per unit of volatility. If you would invest 9,240,000 in LG Electronics on August 28, 2024 and sell it today you would earn a total of 180,000 from holding LG Electronics or generate 1.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Samsung Electronics Co vs. LG Electronics
Performance |
| Timeline |
| Samsung Electronics |
| LG Electronics |
Samsung Electronics and LG Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Samsung Electronics and LG Electronics
The main advantage of trading using opposite Samsung Electronics and LG Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Samsung Electronics 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.| Samsung Electronics vs. JYP Entertainment | Samsung Electronics vs. Samsung Heavy Industries | Samsung Electronics vs. Hanjinkal |
| LG Electronics vs. Foodnamoo | LG Electronics vs. Samsung Life Insurance | LG Electronics vs. Shinhan Financial Group | LG Electronics vs. SCI Information Service |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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