Correlation Between KT Submarine and LG Electronics
Can any of the company-specific risk be diversified away by investing in both KT Submarine 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 KT Submarine and LG Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between KT Submarine Telecom and LG Electronics, you can compare the effects of market volatilities on KT Submarine 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 KT Submarine with a short position of LG Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of KT Submarine and LG Electronics.
Diversification Opportunities for KT Submarine and LG Electronics
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between 060370 and 066570 is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding KT Submarine Telecom and LG Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LG Electronics and KT Submarine 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 KT Submarine Telecom 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 KT Submarine i.e., KT Submarine and LG Electronics go up and down completely randomly.
Pair Corralation between KT Submarine and LG Electronics
Assuming the 90 days trading horizon KT Submarine Telecom is expected to generate 1.85 times more return on investment than LG Electronics. However, KT Submarine is 1.85 times more volatile than LG Electronics. It trades about 0.05 of its potential returns per unit of risk. LG Electronics is currently generating about -0.01 per unit of risk. If you would invest 1,035,000 in KT Submarine Telecom on September 26, 2024 and sell it today you would earn a total of 422,000 from holding KT Submarine Telecom or generate 40.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 96.17% |
| Values | Daily Returns |
KT Submarine Telecom vs. LG Electronics
Performance |
| Timeline |
| KT Submarine Telecom |
| LG Electronics |
KT Submarine and LG Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with KT Submarine and LG Electronics
The main advantage of trading using opposite KT Submarine and LG Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KT Submarine 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.| KT Submarine vs. AptaBio Therapeutics | KT Submarine vs. Wonbang Tech Co | KT Submarine vs. Busan Industrial Co | KT Submarine vs. Busan Ind |
| LG Electronics vs. Wave Electronics Co | LG Electronics vs. KT Submarine Telecom | LG Electronics vs. SungMoon Electronics Co | LG Electronics vs. Sungmoon Electronics 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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