Correlation Between LG Electronics and Foodnamoo
Can any of the company-specific risk be diversified away by investing in both LG Electronics and Foodnamoo 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 Foodnamoo into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LG Electronics and Foodnamoo, you can compare the effects of market volatilities on LG Electronics and Foodnamoo 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 Foodnamoo. Check out your portfolio center. Please also check ongoing floating volatility patterns of LG Electronics and Foodnamoo.
Diversification Opportunities for LG Electronics and Foodnamoo
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between 066570 and Foodnamoo is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding LG Electronics and Foodnamoo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Foodnamoo 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 Foodnamoo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Foodnamoo has no effect on the direction of LG Electronics i.e., LG Electronics and Foodnamoo go up and down completely randomly.
Pair Corralation between LG Electronics and Foodnamoo
Assuming the 90 days trading horizon LG Electronics is expected to generate 0.45 times more return on investment than Foodnamoo. However, LG Electronics is 2.21 times less risky than Foodnamoo. It trades about -0.04 of its potential returns per unit of risk. Foodnamoo is currently generating about -0.05 per unit of risk. If you would invest 12,512,200 in LG Electronics on August 31, 2024 and sell it today you would lose (3,542,200) from holding LG Electronics or give up 28.31% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
LG Electronics vs. Foodnamoo
Performance |
| Timeline |
| LG Electronics |
| Foodnamoo |
LG Electronics and Foodnamoo Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LG Electronics and Foodnamoo
The main advantage of trading using opposite LG Electronics and Foodnamoo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LG Electronics position performs unexpectedly, Foodnamoo 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 Foodnamoo will offset losses from the drop in Foodnamoo'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 |
| Foodnamoo vs. Cherrybro coLtd | Foodnamoo vs. Busan Industrial Co | Foodnamoo vs. Busan Ind | Foodnamoo vs. Mirae Asset Daewoo |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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