Correlation Between LG Electronics and PJ Metal
Can any of the company-specific risk be diversified away by investing in both LG Electronics and PJ 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 PJ 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 PJ Metal Co, you can compare the effects of market volatilities on LG Electronics and PJ 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 PJ Metal. Check out your portfolio center. Please also check ongoing floating volatility patterns of LG Electronics and PJ Metal.
Diversification Opportunities for LG Electronics and PJ Metal
-0.01 | Correlation Coefficient |
Good diversification
The 3 months correlation between 066570 and 128660 is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding LG Electronics and PJ Metal Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PJ 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 PJ Metal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PJ Metal has no effect on the direction of LG Electronics i.e., LG Electronics and PJ Metal go up and down completely randomly.
Pair Corralation between LG Electronics and PJ Metal
Assuming the 90 days trading horizon LG Electronics is expected to generate 2.66 times less return on investment than PJ Metal. But when comparing it to its historical volatility, LG Electronics is 1.55 times less risky than PJ Metal. It trades about 0.01 of its potential returns per unit of risk. PJ Metal Co is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 317,763 in PJ Metal Co on September 3, 2024 and sell it today you would lose (16,763) from holding PJ Metal Co or give up 5.28% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
LG Electronics vs. PJ Metal Co
Performance |
| Timeline |
| LG Electronics |
| PJ Metal |
LG Electronics and PJ Metal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LG Electronics and PJ Metal
The main advantage of trading using opposite LG Electronics and PJ Metal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LG Electronics position performs unexpectedly, PJ 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 PJ Metal will offset losses from the drop in PJ Metal's long position.| LG Electronics vs. AptaBio Therapeutics | LG Electronics vs. Daewoo SBI SPAC | LG Electronics vs. Dream Security co | LG Electronics vs. Microfriend |
| PJ Metal vs. Keum Kang Steel | PJ Metal vs. Tplex Co | PJ Metal vs. Gyeongnam Steel Co | PJ Metal vs. Jeil Steel Mfg |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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