Correlation Between Busan Ind and LG Energy
Can any of the company-specific risk be diversified away by investing in both Busan Ind and LG Energy 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 Busan Ind and LG Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Busan Ind and LG Energy Solution, you can compare the effects of market volatilities on Busan Ind and LG Energy 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 Busan Ind with a short position of LG Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Busan Ind and LG Energy.
Diversification Opportunities for Busan Ind and LG Energy
Very good diversification
The 3 months correlation between Busan and 373220 is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Busan Ind and LG Energy Solution in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LG Energy Solution and Busan Ind 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 Busan Ind are associated (or correlated) with LG Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LG Energy Solution has no effect on the direction of Busan Ind i.e., Busan Ind and LG Energy go up and down completely randomly.
Pair Corralation between Busan Ind and LG Energy
Assuming the 90 days trading horizon Busan Ind is expected to generate 1.7 times more return on investment than LG Energy. However, Busan Ind is 1.7 times more volatile than LG Energy Solution. It trades about 0.07 of its potential returns per unit of risk. LG Energy Solution is currently generating about 0.04 per unit of risk. If you would invest 5,600,000 in Busan Ind on September 12, 2024 and sell it today you would earn a total of 1,620,000 from holding Busan Ind or generate 28.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Busan Ind vs. LG Energy Solution
Performance |
| Timeline |
| Busan Ind |
| LG Energy Solution |
Busan Ind and LG Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Busan Ind and LG Energy
The main advantage of trading using opposite Busan Ind and LG Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Busan Ind position performs unexpectedly, LG Energy 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 Energy will offset losses from the drop in LG Energy's long position.| Busan Ind vs. Settlebank | Busan Ind vs. Jeju Bank | Busan Ind vs. Daejoo Electronic Materials | Busan Ind vs. InfoBank |
| LG Energy vs. Bohae Brewery | LG Energy vs. Hanjin Transportation Co | LG Energy vs. Daehan Steel | LG Energy vs. Lotte Chilsung Beverage |
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
Other Complementary Tools
| Watchlist Optimization Optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm | |
| Bonds Directory Find actively traded corporate debentures issued by US companies | |
| Bond Analysis Evaluate and analyze corporate bonds as a potential investment for your portfolios. | |
| Efficient Frontier Plot and analyze your portfolio and positions against risk-return landscape of the market. | |
| Stocks Directory Find actively traded stocks across global markets |