Correlation Between LG Electronics and Lotte Chilsung
Can any of the company-specific risk be diversified away by investing in both LG Electronics and Lotte Chilsung 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 Chilsung 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 Chilsung Beverage, you can compare the effects of market volatilities on LG Electronics and Lotte Chilsung 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 Chilsung. Check out your portfolio center. Please also check ongoing floating volatility patterns of LG Electronics and Lotte Chilsung.
Diversification Opportunities for LG Electronics and Lotte Chilsung
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between 066570 and Lotte is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding LG Electronics and Lotte Chilsung Beverage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lotte Chilsung Beverage 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 Chilsung. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lotte Chilsung Beverage has no effect on the direction of LG Electronics i.e., LG Electronics and Lotte Chilsung go up and down completely randomly.
Pair Corralation between LG Electronics and Lotte Chilsung
Assuming the 90 days trading horizon LG Electronics is expected to generate 7.7 times less return on investment than Lotte Chilsung. But when comparing it to its historical volatility, LG Electronics is 1.37 times less risky than Lotte Chilsung. It trades about 0.02 of its potential returns per unit of risk. Lotte Chilsung Beverage is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 11,720,000 in Lotte Chilsung Beverage on August 31, 2024 and sell it today you would earn a total of 550,000 from holding Lotte Chilsung Beverage or generate 4.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
LG Electronics vs. Lotte Chilsung Beverage
Performance |
| Timeline |
| LG Electronics |
| Lotte Chilsung Beverage |
LG Electronics and Lotte Chilsung Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LG Electronics and Lotte Chilsung
The main advantage of trading using opposite LG Electronics and Lotte Chilsung positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LG Electronics position performs unexpectedly, Lotte Chilsung 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 Chilsung will offset losses from the drop in Lotte Chilsung's long position.| LG Electronics vs. LG Display | LG Electronics vs. Hyundai Motor | LG Electronics vs. Hyundai Motor Co | LG Electronics vs. Hyundai Motor Co |
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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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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