Correlation Between MSC Co and LG Electronics
Can any of the company-specific risk be diversified away by investing in both MSC Co 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 MSC Co and LG Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MSC Co and LG Electronics Pfd, you can compare the effects of market volatilities on MSC Co 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 MSC Co with a short position of LG Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of MSC Co and LG Electronics.
Diversification Opportunities for MSC Co and LG Electronics
-0.35 | Correlation Coefficient |
Very good diversification
The 3 months correlation between MSC and 066575 is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding MSC Co and LG Electronics Pfd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LG Electronics Pfd and MSC Co 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 MSC 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 Pfd has no effect on the direction of MSC Co i.e., MSC Co and LG Electronics go up and down completely randomly.
Pair Corralation between MSC Co and LG Electronics
Assuming the 90 days trading horizon MSC Co is expected to generate 1.62 times more return on investment than LG Electronics. However, MSC Co is 1.62 times more volatile than LG Electronics Pfd. It trades about 0.08 of its potential returns per unit of risk. LG Electronics Pfd is currently generating about -0.18 per unit of risk. If you would invest 528,000 in MSC Co on September 12, 2024 and sell it today you would earn a total of 27,000 from holding MSC Co or generate 5.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
MSC Co vs. LG Electronics Pfd
Performance |
| Timeline |
| MSC Co |
| LG Electronics Pfd |
MSC Co and LG Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MSC Co and LG Electronics
The main advantage of trading using opposite MSC Co and LG Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MSC Co 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.| MSC Co vs. DAEDUCK ELECTRONICS CoLtd | MSC Co vs. Mgame Corp | MSC Co vs. Shinil Electronics Co | MSC Co vs. Daejoo Electronic Materials |
| LG Electronics vs. FoodNamoo | LG Electronics vs. Nable Communications | LG Electronics vs. Playgram Co | LG Electronics vs. Iljin Display |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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