Correlation Between Lake Materials and LG Energy
Can any of the company-specific risk be diversified away by investing in both Lake Materials and LG Energy 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 Lake Materials and LG Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lake Materials Co and LG Energy Solution, you can compare the effects of market volatilities on Lake Materials and LG Energy 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 Lake Materials with a short position of LG Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lake Materials and LG Energy.
Diversification Opportunities for Lake Materials and LG Energy
-0.07 | Correlation Coefficient |
Good diversification
The 3 months correlation between Lake and 373220 is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Lake Materials Co and LG Energy Solution in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LG Energy Solution and Lake Materials 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 Lake Materials Co are associated (or correlated) with LG Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LG Energy Solution has no effect on the direction of Lake Materials i.e., Lake Materials and LG Energy go up and down completely randomly.
Pair Corralation between Lake Materials and LG Energy
Assuming the 90 days trading horizon Lake Materials Co is expected to generate 1.83 times more return on investment than LG Energy. However, Lake Materials is 1.83 times more volatile than LG Energy Solution. It trades about 0.06 of its potential returns per unit of risk. LG Energy Solution is currently generating about -0.02 per unit of risk. If you would invest 857,125 in Lake Materials Co on November 27, 2024 and sell it today you would earn a total of 1,123,875 from holding Lake Materials Co or generate 131.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lake Materials Co vs. LG Energy Solution
Performance |
| Timeline |
| Lake Materials |
| LG Energy Solution |
Lake Materials and LG Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lake Materials and LG Energy
The main advantage of trading using opposite Lake Materials and LG Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lake Materials position performs unexpectedly, LG Energy 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 Energy will offset losses from the drop in LG Energy's long position.| Lake Materials vs. Samsung Electronics Co | Lake Materials vs. Samsung Electronics Co | Lake Materials vs. LG Energy Solution | Lake Materials vs. SK Hynix |
| LG Energy vs. Worldex Industry Trading | LG Energy vs. Aju IB Investment | LG Energy vs. Hana Financial | LG Energy vs. Jeju 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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