Correlation Between System and LG Energy
Can any of the company-specific risk be diversified away by investing in both System 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 System and LG Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between System and Application and LG Energy Solution, you can compare the effects of market volatilities on System 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 System with a short position of LG Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of System and LG Energy.
Diversification Opportunities for System and LG Energy
Very good diversification
The 3 months correlation between System and 373220 is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding System and Application 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 System 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 System and Application 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 System i.e., System and LG Energy go up and down completely randomly.
Pair Corralation between System and LG Energy
Assuming the 90 days trading horizon System and Application is expected to generate 1.13 times more return on investment than LG Energy. However, System is 1.13 times more volatile than LG Energy Solution. It trades about 0.0 of its potential returns per unit of risk. LG Energy Solution is currently generating about -0.01 per unit of risk. If you would invest 206,055 in System and Application on October 14, 2024 and sell it today you would lose (39,455) from holding System and Application or give up 19.15% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
System and Application vs. LG Energy Solution
Performance |
| Timeline |
| System and Application |
| LG Energy Solution |
System and LG Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with System and LG Energy
The main advantage of trading using opposite System and LG Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if System 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.| System vs. DSC Investment | System vs. SV Investment | System vs. DB Financial Investment | System vs. Korea Air Svc |
| LG Energy vs. Lotte Non Life Insurance | LG Energy vs. Jeju Air Co | LG Energy vs. Shinhan Financial Group | LG Energy vs. Jin Air 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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