Correlation Between LG Energy and SK Hynix
Can any of the company-specific risk be diversified away by investing in both LG Energy and SK Hynix 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 Energy and SK Hynix into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LG Energy Solution and SK Hynix, you can compare the effects of market volatilities on LG Energy and SK Hynix 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 Energy with a short position of SK Hynix. Check out your portfolio center. Please also check ongoing floating volatility patterns of LG Energy and SK Hynix.
Diversification Opportunities for LG Energy and SK Hynix
Good diversification
The 3 months correlation between 373220 and 000660 is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding LG Energy Solution and SK Hynix in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SK Hynix and LG Energy 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 Energy Solution are associated (or correlated) with SK Hynix. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SK Hynix has no effect on the direction of LG Energy i.e., LG Energy and SK Hynix go up and down completely randomly.
Pair Corralation between LG Energy and SK Hynix
Assuming the 90 days trading horizon LG Energy Solution is expected to generate 1.03 times more return on investment than SK Hynix. However, LG Energy is 1.03 times more volatile than SK Hynix. It trades about 0.0 of its potential returns per unit of risk. SK Hynix is currently generating about -0.01 per unit of risk. If you would invest 41,450,000 in LG Energy Solution on August 28, 2024 and sell it today you would lose (850,000) from holding LG Energy Solution or give up 2.05% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
LG Energy Solution vs. SK Hynix
Performance |
| Timeline |
| LG Energy Solution |
| SK Hynix |
LG Energy and SK Hynix Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LG Energy and SK Hynix
The main advantage of trading using opposite LG Energy and SK Hynix positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LG Energy position performs unexpectedly, SK Hynix 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 SK Hynix will offset losses from the drop in SK Hynix's long position.The idea behind LG Energy Solution and SK Hynix pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| SK Hynix vs. Korea Real Estate | SK Hynix vs. Korea Ratings Co | SK Hynix vs. IQuest Co | SK Hynix vs. Wonbang Tech Co |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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