Correlation Between Clean Science and LG Electronics
Can any of the company-specific risk be diversified away by investing in both Clean Science 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 Clean Science and LG Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Clean Science co and LG Electronics Pfd, you can compare the effects of market volatilities on Clean Science 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 Clean Science with a short position of LG Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Clean Science and LG Electronics.
Diversification Opportunities for Clean Science and LG Electronics
0.52 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Clean and 066575 is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Clean Science 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 Clean Science 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 Clean Science 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 Clean Science i.e., Clean Science and LG Electronics go up and down completely randomly.
Pair Corralation between Clean Science and LG Electronics
Assuming the 90 days trading horizon Clean Science co is expected to under-perform the LG Electronics. But the stock apears to be less risky and, when comparing its historical volatility, Clean Science co is 1.39 times less risky than LG Electronics. The stock trades about -0.44 of its potential returns per unit of risk. The LG Electronics Pfd is currently generating about -0.3 of returns per unit of risk over similar time horizon. If you would invest 4,680,000 in LG Electronics Pfd on September 4, 2024 and sell it today you would lose (440,000) from holding LG Electronics Pfd or give up 9.4% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Clean Science co vs. LG Electronics Pfd
Performance |
| Timeline |
| Clean Science co |
| LG Electronics Pfd |
Clean Science and LG Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Clean Science and LG Electronics
The main advantage of trading using opposite Clean Science and LG Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Clean Science 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.| Clean Science vs. LG Display | Clean Science vs. Hyundai Motor | Clean Science vs. Hyundai Motor Co | Clean Science vs. Hyundai Motor Co |
| LG Electronics vs. AptaBio Therapeutics | LG Electronics vs. Daewoo SBI SPAC | LG Electronics vs. Dream Security co | LG Electronics vs. Microfriend |
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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