Correlation Between Microfriend and LG Electronics
Can any of the company-specific risk be diversified away by investing in both Microfriend and LG Electronics 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 Microfriend and LG Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microfriend and LG Electronics, you can compare the effects of market volatilities on Microfriend and LG Electronics 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 Microfriend with a short position of LG Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microfriend and LG Electronics.
Diversification Opportunities for Microfriend and LG Electronics
-0.23 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Microfriend and 066570 is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Microfriend and LG Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LG Electronics and Microfriend 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 Microfriend are associated (or correlated) with LG Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LG Electronics has no effect on the direction of Microfriend i.e., Microfriend and LG Electronics go up and down completely randomly.
Pair Corralation between Microfriend and LG Electronics
Assuming the 90 days trading horizon Microfriend is expected to under-perform the LG Electronics. In addition to that, Microfriend is 3.35 times more volatile than LG Electronics. It trades about -0.25 of its total potential returns per unit of risk. LG Electronics is currently generating about 0.07 per unit of volatility. If you would invest 9,240,000 in LG Electronics on August 27, 2024 and sell it today you would earn a total of 180,000 from holding LG Electronics or generate 1.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microfriend vs. LG Electronics
Performance |
| Timeline |
| Microfriend |
| LG Electronics |
Microfriend and LG Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microfriend and LG Electronics
The main advantage of trading using opposite Microfriend and LG Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microfriend position performs unexpectedly, LG Electronics 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 LG Electronics will offset losses from the drop in LG Electronics' long position.| Microfriend vs. SK Hynix | Microfriend vs. People Technology | Microfriend vs. SIMMTECH Co | Microfriend vs. Haesung DS Co |
| LG Electronics vs. AptaBio Therapeutics | LG Electronics vs. Daewoo SBI SPAC | LG Electronics vs. Dream Security co | LG Electronics vs. Microfriend |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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