Correlation Between SungMoon Electronics and LG Electronics
Can any of the company-specific risk be diversified away by investing in both SungMoon 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 SungMoon 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 SungMoon Electronics Co and LG Electronics, you can compare the effects of market volatilities on SungMoon 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 SungMoon Electronics with a short position of LG Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of SungMoon Electronics and LG Electronics.
Diversification Opportunities for SungMoon Electronics and LG Electronics
0.58 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between SungMoon and 066570 is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding SungMoon 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 SungMoon 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 SungMoon 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 SungMoon Electronics i.e., SungMoon Electronics and LG Electronics go up and down completely randomly.
Pair Corralation between SungMoon Electronics and LG Electronics
Assuming the 90 days trading horizon SungMoon Electronics Co is expected to generate 1.24 times more return on investment than LG Electronics. However, SungMoon Electronics is 1.24 times more volatile than LG Electronics. It trades about -0.03 of its potential returns per unit of risk. LG Electronics is currently generating about -0.12 per unit of risk. If you would invest 127,400 in SungMoon Electronics Co on October 14, 2024 and sell it today you would lose (6,900) from holding SungMoon Electronics Co or give up 5.42% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
SungMoon Electronics Co vs. LG Electronics
Performance |
| Timeline |
| SungMoon Electronics |
| LG Electronics |
SungMoon Electronics and LG Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SungMoon Electronics and LG Electronics
The main advantage of trading using opposite SungMoon Electronics and LG Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SungMoon 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.| SungMoon Electronics vs. Youngbo Chemical Co | SungMoon Electronics vs. iNtRON Biotechnology | SungMoon Electronics vs. Daou Technology | SungMoon Electronics vs. Hanil Chemical Ind |
| LG Electronics vs. Daol Investment Securities | LG Electronics vs. SBI Investment KOREA | LG Electronics vs. Insung Information Co | LG Electronics vs. Korea Information Engineering |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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