Correlation Between LG Electronics and NEXTIN
Can any of the company-specific risk be diversified away by investing in both LG Electronics and NEXTIN 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 NEXTIN into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LG Electronics and NEXTIN Inc, you can compare the effects of market volatilities on LG Electronics and NEXTIN 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 NEXTIN. Check out your portfolio center. Please also check ongoing floating volatility patterns of LG Electronics and NEXTIN.
Diversification Opportunities for LG Electronics and NEXTIN
-0.72 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between 066570 and NEXTIN is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding LG Electronics and NEXTIN Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NEXTIN Inc 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 NEXTIN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NEXTIN Inc has no effect on the direction of LG Electronics i.e., LG Electronics and NEXTIN go up and down completely randomly.
Pair Corralation between LG Electronics and NEXTIN
Assuming the 90 days trading horizon LG Electronics is expected to under-perform the NEXTIN. But the stock apears to be less risky and, when comparing its historical volatility, LG Electronics is 1.52 times less risky than NEXTIN. The stock trades about -0.03 of its potential returns per unit of risk. The NEXTIN Inc is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest 6,550,000 in NEXTIN Inc on September 3, 2024 and sell it today you would lose (860,000) from holding NEXTIN Inc or give up 13.13% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
LG Electronics vs. NEXTIN Inc
Performance |
| Timeline |
| LG Electronics |
| NEXTIN Inc |
LG Electronics and NEXTIN Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LG Electronics and NEXTIN
The main advantage of trading using opposite LG Electronics and NEXTIN positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LG Electronics position performs unexpectedly, NEXTIN 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 NEXTIN will offset losses from the drop in NEXTIN'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 |
| NEXTIN vs. Parksystems Corp | NEXTIN vs. LEENO Industrial | NEXTIN vs. Tesna Inc | NEXTIN vs. Tokai Carbon Korea |
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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