Correlation Between Ecoplastic and LG Energy
Can any of the company-specific risk be diversified away by investing in both Ecoplastic 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 Ecoplastic and LG Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ecoplastic and LG Energy Solution, you can compare the effects of market volatilities on Ecoplastic 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 Ecoplastic with a short position of LG Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ecoplastic and LG Energy.
Diversification Opportunities for Ecoplastic and LG Energy
-0.2 | Correlation Coefficient |
Good diversification
The 3 months correlation between Ecoplastic and 373220 is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Ecoplastic 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 Ecoplastic 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 Ecoplastic 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 Ecoplastic i.e., Ecoplastic and LG Energy go up and down completely randomly.
Pair Corralation between Ecoplastic and LG Energy
Assuming the 90 days trading horizon Ecoplastic is expected to under-perform the LG Energy. But the stock apears to be less risky and, when comparing its historical volatility, Ecoplastic is 1.08 times less risky than LG Energy. The stock trades about -0.09 of its potential returns per unit of risk. The LG Energy Solution is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest 38,600,000 in LG Energy Solution on December 3, 2024 and sell it today you would lose (3,400,000) from holding LG Energy Solution or give up 8.81% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ecoplastic vs. LG Energy Solution
Performance |
| Timeline |
| Ecoplastic |
| LG Energy Solution |
Ecoplastic and LG Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ecoplastic and LG Energy
The main advantage of trading using opposite Ecoplastic and LG Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ecoplastic 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.| Ecoplastic vs. Kg Chemical | ||
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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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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