Correlation Between LG Uplus and YG Entertainment
Can any of the company-specific risk be diversified away by investing in both LG Uplus and YG Entertainment 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 LG Uplus and YG Entertainment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LG Uplus and YG Entertainment, you can compare the effects of market volatilities on LG Uplus and YG Entertainment 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 LG Uplus with a short position of YG Entertainment. Check out your portfolio center. Please also check ongoing floating volatility patterns of LG Uplus and YG Entertainment.
Diversification Opportunities for LG Uplus and YG Entertainment
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between 032640 and 122870 is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding LG Uplus and YG Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on YG Entertainment and LG Uplus 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 LG Uplus are associated (or correlated) with YG Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of YG Entertainment has no effect on the direction of LG Uplus i.e., LG Uplus and YG Entertainment go up and down completely randomly.
Pair Corralation between LG Uplus and YG Entertainment
Assuming the 90 days trading horizon LG Uplus is expected to generate 0.68 times more return on investment than YG Entertainment. However, LG Uplus is 1.46 times less risky than YG Entertainment. It trades about 0.22 of its potential returns per unit of risk. YG Entertainment is currently generating about 0.08 per unit of risk. If you would invest 1,000,000 in LG Uplus on September 13, 2024 and sell it today you would earn a total of 91,000 from holding LG Uplus or generate 9.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
LG Uplus vs. YG Entertainment
Performance |
| Timeline |
| LG Uplus |
| YG Entertainment |
LG Uplus and YG Entertainment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LG Uplus and YG Entertainment
The main advantage of trading using opposite LG Uplus and YG Entertainment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LG Uplus position performs unexpectedly, YG Entertainment 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 YG Entertainment will offset losses from the drop in YG Entertainment's long position.| LG Uplus vs. YG Entertainment | LG Uplus vs. JYP Entertainment | LG Uplus vs. Cube Entertainment | LG Uplus vs. FNC Entertainment Co |
| YG Entertainment vs. JYP Entertainment | YG Entertainment vs. Cube Entertainment | YG Entertainment vs. FNC Entertainment Co |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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