Correlation Between LG Chemicals and LG Electronics
Can any of the company-specific risk be diversified away by investing in both LG Chemicals 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 LG Chemicals and LG Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LG Chemicals and LG Electronics, you can compare the effects of market volatilities on LG Chemicals 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 LG Chemicals with a short position of LG Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of LG Chemicals and LG Electronics.
Diversification Opportunities for LG Chemicals and LG Electronics
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between 051910 and 066570 is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding LG Chemicals and LG Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LG Electronics and LG Chemicals 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 Chemicals 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 LG Chemicals i.e., LG Chemicals and LG Electronics go up and down completely randomly.
Pair Corralation between LG Chemicals and LG Electronics
Assuming the 90 days trading horizon LG Chemicals is expected to under-perform the LG Electronics. In addition to that, LG Chemicals is 1.89 times more volatile than LG Electronics. It trades about -0.18 of its total potential returns per unit of risk. LG Electronics is currently generating about -0.03 per unit of volatility. If you would invest 9,080,000 in LG Electronics on September 2, 2024 and sell it today you would lose (110,000) from holding LG Electronics or give up 1.21% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
LG Chemicals vs. LG Electronics
Performance |
| Timeline |
| LG Chemicals |
| LG Electronics |
LG Chemicals and LG Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LG Chemicals and LG Electronics
The main advantage of trading using opposite LG Chemicals and LG Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LG Chemicals 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.| LG Chemicals vs. POSCO Holdings | LG Chemicals vs. Hanwha Solutions | LG Chemicals vs. Hyundai Steel | LG Chemicals vs. Ecopro 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
Other Complementary Tools
| Top Crypto Exchanges Search and analyze digital assets across top global cryptocurrency exchanges | |
| Global Markets Map Get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes | |
| Balance Of Power Check stock momentum by analyzing Balance Of Power indicator and other technical ratios | |
| Bonds Directory Find actively traded corporate debentures issued by US companies | |
| ETF Categories List of ETF categories grouped based on various criteria, such as the investment strategy or type of investments |