Correlation Between LG Electronics and Keyang Electric
Can any of the company-specific risk be diversified away by investing in both LG Electronics and Keyang Electric 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 Keyang Electric into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LG Electronics and Keyang Electric Machinery, you can compare the effects of market volatilities on LG Electronics and Keyang Electric 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 Keyang Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of LG Electronics and Keyang Electric.
Diversification Opportunities for LG Electronics and Keyang Electric
-0.32 | Correlation Coefficient |
Very good diversification
The 3 months correlation between 066570 and Keyang is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding LG Electronics and Keyang Electric Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Keyang Electric Machinery 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 Keyang Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Keyang Electric Machinery has no effect on the direction of LG Electronics i.e., LG Electronics and Keyang Electric go up and down completely randomly.
Pair Corralation between LG Electronics and Keyang Electric
Assuming the 90 days trading horizon LG Electronics is expected to generate 2.58 times less return on investment than Keyang Electric. But when comparing it to its historical volatility, LG Electronics is 2.03 times less risky than Keyang Electric. It trades about 0.09 of its potential returns per unit of risk. Keyang Electric Machinery is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 362,000 in Keyang Electric Machinery on October 29, 2024 and sell it today you would earn a total of 17,500 from holding Keyang Electric Machinery or generate 4.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
LG Electronics vs. Keyang Electric Machinery
Performance |
| Timeline |
| LG Electronics |
| Keyang Electric Machinery |
LG Electronics and Keyang Electric Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LG Electronics and Keyang Electric
The main advantage of trading using opposite LG Electronics and Keyang Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LG Electronics position performs unexpectedly, Keyang Electric 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 Keyang Electric will offset losses from the drop in Keyang Electric's long position.| LG Electronics vs. DB Insurance Co | LG Electronics vs. InfoBank | LG Electronics vs. Korean Reinsurance Co | LG Electronics vs. Chorokbaem Healthcare Co |
| Keyang Electric vs. Korea Petro Chemical | Keyang Electric vs. Youngchang Chemical Co | Keyang Electric vs. Namhae Chemical | Keyang Electric vs. Kyung In Synthetic Corp |
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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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