Correlation Between LG Electronics and System
Can any of the company-specific risk be diversified away by investing in both LG Electronics and System 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 System 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 System and Application, you can compare the effects of market volatilities on LG Electronics and System 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 System. Check out your portfolio center. Please also check ongoing floating volatility patterns of LG Electronics and System.
Diversification Opportunities for LG Electronics and System
0.44 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between 066575 and System is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding LG Electronics Pfd and System and Application in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on System and Application 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 System. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of System and Application has no effect on the direction of LG Electronics i.e., LG Electronics and System go up and down completely randomly.
Pair Corralation between LG Electronics and System
Assuming the 90 days trading horizon LG Electronics Pfd is expected to generate 0.56 times more return on investment than System. However, LG Electronics Pfd is 1.8 times less risky than System. It trades about 0.01 of its potential returns per unit of risk. System and Application is currently generating about -0.02 per unit of risk. If you would invest 4,103,930 in LG Electronics Pfd on September 3, 2024 and sell it today you would earn a total of 191,070 from holding LG Electronics Pfd or generate 4.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
LG Electronics Pfd vs. System and Application
Performance |
| Timeline |
| LG Electronics Pfd |
| System and Application |
LG Electronics and System Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LG Electronics and System
The main advantage of trading using opposite LG Electronics and System positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LG Electronics position performs unexpectedly, System 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 System will offset losses from the drop in System's long position.| LG Electronics vs. AptaBio Therapeutics | LG Electronics vs. Daewoo SBI SPAC | LG Electronics vs. Dream Security co | LG Electronics vs. Microfriend |
| System vs. Dongsin Engineering Construction | System vs. Doosan Fuel Cell | System vs. Daishin Balance 1 | System vs. Total Soft Bank |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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