Correlation Between LG Electronics and InnoTherapy
Can any of the company-specific risk be diversified away by investing in both LG Electronics and InnoTherapy 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 InnoTherapy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LG Electronics and InnoTherapy, you can compare the effects of market volatilities on LG Electronics and InnoTherapy 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 InnoTherapy. Check out your portfolio center. Please also check ongoing floating volatility patterns of LG Electronics and InnoTherapy.
Diversification Opportunities for LG Electronics and InnoTherapy
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between 066570 and InnoTherapy is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding LG Electronics and InnoTherapy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on InnoTherapy 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 InnoTherapy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of InnoTherapy has no effect on the direction of LG Electronics i.e., LG Electronics and InnoTherapy go up and down completely randomly.
Pair Corralation between LG Electronics and InnoTherapy
Assuming the 90 days trading horizon LG Electronics is expected to generate 0.7 times more return on investment than InnoTherapy. However, LG Electronics is 1.42 times less risky than InnoTherapy. It trades about 0.08 of its potential returns per unit of risk. InnoTherapy is currently generating about -0.09 per unit of risk. If you would invest 9,240,000 in LG Electronics on August 28, 2024 and sell it today you would earn a total of 210,000 from holding LG Electronics or generate 2.27% 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. InnoTherapy
Performance |
| Timeline |
| LG Electronics |
| InnoTherapy |
LG Electronics and InnoTherapy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LG Electronics and InnoTherapy
The main advantage of trading using opposite LG Electronics and InnoTherapy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LG Electronics position performs unexpectedly, InnoTherapy 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 InnoTherapy will offset losses from the drop in InnoTherapy's long position.| LG Electronics vs. AptaBio Therapeutics | LG Electronics vs. Daewoo SBI SPAC | LG Electronics vs. Dream Security co | LG Electronics vs. Microfriend |
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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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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