Correlation Between LG Electronics and Kbi Metal
Can any of the company-specific risk be diversified away by investing in both LG Electronics and Kbi Metal 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 Kbi Metal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LG Electronics and Kbi Metal Co, you can compare the effects of market volatilities on LG Electronics and Kbi Metal 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 Kbi Metal. Check out your portfolio center. Please also check ongoing floating volatility patterns of LG Electronics and Kbi Metal.
Diversification Opportunities for LG Electronics and Kbi Metal
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between 066570 and Kbi is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding LG Electronics and Kbi Metal Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kbi Metal 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 Kbi Metal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kbi Metal has no effect on the direction of LG Electronics i.e., LG Electronics and Kbi Metal go up and down completely randomly.
Pair Corralation between LG Electronics and Kbi Metal
Assuming the 90 days trading horizon LG Electronics is expected to generate 17.25 times less return on investment than Kbi Metal. But when comparing it to its historical volatility, LG Electronics is 2.4 times less risky than Kbi Metal. It trades about 0.0 of its potential returns per unit of risk. Kbi Metal Co is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 144,000 in Kbi Metal Co on September 12, 2024 and sell it today you would earn a total of 43,100 from holding Kbi Metal Co or generate 29.93% 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. Kbi Metal Co
Performance |
| Timeline |
| LG Electronics |
| Kbi Metal |
LG Electronics and Kbi Metal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LG Electronics and Kbi Metal
The main advantage of trading using opposite LG Electronics and Kbi Metal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LG Electronics position performs unexpectedly, Kbi Metal 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 Kbi Metal will offset losses from the drop in Kbi Metal's long position.| LG Electronics vs. Kbi Metal Co | LG Electronics vs. Mobile Appliance | LG Electronics vs. Duksan Hi Metal | LG Electronics vs. Lotte Data Communication |
| Kbi Metal vs. Daejung Chemicals Metals | Kbi Metal vs. Dongbang Transport Logistics | Kbi Metal vs. Hankook Furniture Co | Kbi Metal vs. Home Center Holdings |
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 Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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