Correlation Between LG Electronics and Hyundai
Can any of the company-specific risk be diversified away by investing in both LG Electronics and Hyundai 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 Hyundai into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LG Electronics Pfd and Hyundai Motor Co, you can compare the effects of market volatilities on LG Electronics and Hyundai 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 Hyundai. Check out your portfolio center. Please also check ongoing floating volatility patterns of LG Electronics and Hyundai.
Diversification Opportunities for LG Electronics and Hyundai
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between 066575 and Hyundai is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding LG Electronics Pfd and Hyundai Motor Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hyundai Motor 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 Pfd are associated (or correlated) with Hyundai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hyundai Motor has no effect on the direction of LG Electronics i.e., LG Electronics and Hyundai go up and down completely randomly.
Pair Corralation between LG Electronics and Hyundai
Assuming the 90 days trading horizon LG Electronics is expected to generate 75.29 times less return on investment than Hyundai. But when comparing it to its historical volatility, LG Electronics Pfd is 1.47 times less risky than Hyundai. It trades about 0.0 of its potential returns per unit of risk. Hyundai Motor Co is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 9,994,367 in Hyundai Motor Co on August 25, 2024 and sell it today you would earn a total of 6,395,633 from holding Hyundai Motor Co or generate 63.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
LG Electronics Pfd vs. Hyundai Motor Co
Performance |
| Timeline |
| LG Electronics Pfd |
| Hyundai Motor |
LG Electronics and Hyundai Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LG Electronics and Hyundai
The main advantage of trading using opposite LG Electronics and Hyundai positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LG Electronics position performs unexpectedly, Hyundai 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 Hyundai will offset losses from the drop in Hyundai's long position.| LG Electronics vs. SBI Investment KOREA | LG Electronics vs. Nh Investment And | LG Electronics vs. LB Investment | LG Electronics vs. Lindeman Asia Investment |
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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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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