Correlation Between LB Investment and YG Entertainment
Can any of the company-specific risk be diversified away by investing in both LB Investment and YG Entertainment 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 LB Investment and YG Entertainment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LB Investment and YG Entertainment, you can compare the effects of market volatilities on LB Investment and YG Entertainment 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 LB Investment with a short position of YG Entertainment. Check out your portfolio center. Please also check ongoing floating volatility patterns of LB Investment and YG Entertainment.
Diversification Opportunities for LB Investment and YG Entertainment
-0.65 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between 309960 and 122870 is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding LB Investment and YG Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on YG Entertainment and LB Investment 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 LB Investment are associated (or correlated) with YG Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of YG Entertainment has no effect on the direction of LB Investment i.e., LB Investment and YG Entertainment go up and down completely randomly.
Pair Corralation between LB Investment and YG Entertainment
Assuming the 90 days trading horizon LB Investment is expected to under-perform the YG Entertainment. But the stock apears to be less risky and, when comparing its historical volatility, LB Investment is 2.84 times less risky than YG Entertainment. The stock trades about -0.2 of its potential returns per unit of risk. The YG Entertainment is currently generating about 0.37 of returns per unit of risk over similar time horizon. If you would invest 3,845,000 in YG Entertainment on August 31, 2024 and sell it today you would earn a total of 930,000 from holding YG Entertainment or generate 24.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
LB Investment vs. YG Entertainment
Performance |
| Timeline |
| LB Investment |
| YG Entertainment |
LB Investment and YG Entertainment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LB Investment and YG Entertainment
The main advantage of trading using opposite LB Investment and YG Entertainment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LB Investment position performs unexpectedly, YG Entertainment 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 YG Entertainment will offset losses from the drop in YG Entertainment's long position.| LB Investment vs. Samsung Electronics Co | LB Investment vs. Samsung Electronics Co | LB Investment vs. LG Energy Solution | LB Investment vs. SK Hynix |
| YG Entertainment vs. Samsung Electronics Co | YG Entertainment vs. Samsung Electronics Co | YG Entertainment vs. LG Energy Solution | YG Entertainment vs. SK Hynix |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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