Correlation Between LG Electronics and Naver
Can any of the company-specific risk be diversified away by investing in both LG Electronics and Naver 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 Naver into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LG Electronics and Naver, you can compare the effects of market volatilities on LG Electronics and Naver 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 Naver. Check out your portfolio center. Please also check ongoing floating volatility patterns of LG Electronics and Naver.
Diversification Opportunities for LG Electronics and Naver
-0.64 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between 066570 and Naver is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding LG Electronics and Naver in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Naver 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 Naver. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Naver has no effect on the direction of LG Electronics i.e., LG Electronics and Naver go up and down completely randomly.
Pair Corralation between LG Electronics and Naver
Assuming the 90 days trading horizon LG Electronics is expected to under-perform the Naver. But the stock apears to be less risky and, when comparing its historical volatility, LG Electronics is 1.11 times less risky than Naver. The stock trades about -0.09 of its potential returns per unit of risk. The Naver is currently generating about 0.51 of returns per unit of risk over similar time horizon. If you would invest 17,570,000 in Naver on September 3, 2024 and sell it today you would earn a total of 3,080,000 from holding Naver or generate 17.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
LG Electronics vs. Naver
Performance |
| Timeline |
| LG Electronics |
| Naver |
LG Electronics and Naver Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LG Electronics and Naver
The main advantage of trading using opposite LG Electronics and Naver positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LG Electronics position performs unexpectedly, Naver 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 Naver will offset losses from the drop in Naver's long position.| LG Electronics vs. Lindeman Asia Investment | LG Electronics vs. EBEST Investment Securities | LG Electronics vs. Sangsangin Investment Securities | LG Electronics vs. Shinhan Inverse Silver |
| Naver vs. Ilji Technology Co | Naver vs. Haitai Confectionery Foods | Naver vs. Formetal Co | Naver vs. Seoul Food Industrial |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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