Correlation Between LG Electronics and Lotte Fine
Can any of the company-specific risk be diversified away by investing in both LG Electronics and Lotte Fine 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 Electronics and Lotte Fine into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LG Electronics and Lotte Fine Chemical, you can compare the effects of market volatilities on LG Electronics and Lotte Fine 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 Electronics with a short position of Lotte Fine. Check out your portfolio center. Please also check ongoing floating volatility patterns of LG Electronics and Lotte Fine.
Diversification Opportunities for LG Electronics and Lotte Fine
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between 066570 and Lotte is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding LG Electronics and Lotte Fine Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lotte Fine Chemical and LG Electronics 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 Electronics are associated (or correlated) with Lotte Fine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lotte Fine Chemical has no effect on the direction of LG Electronics i.e., LG Electronics and Lotte Fine go up and down completely randomly.
Pair Corralation between LG Electronics and Lotte Fine
Assuming the 90 days trading horizon LG Electronics is expected to generate 0.73 times more return on investment than Lotte Fine. However, LG Electronics is 1.36 times less risky than Lotte Fine. It trades about -0.1 of its potential returns per unit of risk. Lotte Fine Chemical is currently generating about -0.39 per unit of risk. If you would invest 9,720,000 in LG Electronics on August 25, 2024 and sell it today you would lose (390,000) from holding LG Electronics or give up 4.01% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
LG Electronics vs. Lotte Fine Chemical
Performance |
| Timeline |
| LG Electronics |
| Lotte Fine Chemical |
LG Electronics and Lotte Fine Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LG Electronics and Lotte Fine
The main advantage of trading using opposite LG Electronics and Lotte Fine positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LG Electronics position performs unexpectedly, Lotte Fine 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 Lotte Fine will offset losses from the drop in Lotte Fine's long position.| LG Electronics vs. Seoul Electronics Telecom | LG Electronics vs. Organic Special Pet | LG Electronics vs. Digital Power Communications | LG Electronics vs. Kisan Telecom Co |
| Lotte Fine vs. Infinitt Healthcare Co | Lotte Fine vs. Sungmoon Electronics Co | Lotte Fine vs. Samyoung Electronics Co | Lotte Fine vs. LG Electronics |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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