Correlation Between LG Electronics and BGF Retail
Can any of the company-specific risk be diversified away by investing in both LG Electronics and BGF Retail 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 BGF Retail into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LG Electronics and BGF Retail Co, you can compare the effects of market volatilities on LG Electronics and BGF Retail 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 BGF Retail. Check out your portfolio center. Please also check ongoing floating volatility patterns of LG Electronics and BGF Retail.
Diversification Opportunities for LG Electronics and BGF Retail
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between 066570 and BGF is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding LG Electronics and BGF Retail Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BGF Retail 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 BGF Retail. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BGF Retail has no effect on the direction of LG Electronics i.e., LG Electronics and BGF Retail go up and down completely randomly.
Pair Corralation between LG Electronics and BGF Retail
Assuming the 90 days trading horizon LG Electronics is expected to generate 0.64 times more return on investment than BGF Retail. However, LG Electronics is 1.57 times less risky than BGF Retail. It trades about 0.01 of its potential returns per unit of risk. BGF Retail Co is currently generating about -0.12 per unit of risk. If you would invest 8,950,000 in LG Electronics on September 1, 2024 and sell it today you would earn a total of 20,000 from holding LG Electronics or generate 0.22% 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. BGF Retail Co
Performance |
| Timeline |
| LG Electronics |
| BGF Retail |
LG Electronics and BGF Retail Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LG Electronics and BGF Retail
The main advantage of trading using opposite LG Electronics and BGF Retail positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LG Electronics position performs unexpectedly, BGF Retail 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 BGF Retail will offset losses from the drop in BGF Retail's long position.| LG Electronics vs. Hyundai Green Food | LG Electronics vs. Seoul Food Industrial | LG Electronics vs. Haitai Confectionery Foods | LG Electronics vs. LS Materials |
| BGF Retail vs. Korea Real Estate | BGF Retail vs. Korea Ratings Co | BGF Retail vs. IQuest Co | BGF Retail vs. Wonbang Tech Co |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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