Correlation Between LG Energy and Hyundai
Can any of the company-specific risk be diversified away by investing in both LG Energy and Hyundai 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 Hyundai 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 Hyundai Motor Co, you can compare the effects of market volatilities on LG Energy and Hyundai 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 Hyundai. Check out your portfolio center. Please also check ongoing floating volatility patterns of LG Energy and Hyundai.
Diversification Opportunities for LG Energy and Hyundai
Average diversification
The 3 months correlation between 373220 and Hyundai is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding LG Energy Solution and Hyundai Motor Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hyundai Motor 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 Hyundai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hyundai Motor has no effect on the direction of LG Energy i.e., LG Energy and Hyundai go up and down completely randomly.
Pair Corralation between LG Energy and Hyundai
Assuming the 90 days trading horizon LG Energy Solution is expected to generate 1.9 times more return on investment than Hyundai. However, LG Energy is 1.9 times more volatile than Hyundai Motor Co. It trades about 0.0 of its potential returns per unit of risk. Hyundai Motor Co is currently generating about -0.08 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 Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
LG Energy Solution vs. Hyundai Motor Co
Performance |
| Timeline |
| LG Energy Solution |
| Hyundai Motor |
LG Energy and Hyundai Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LG Energy and Hyundai
The main advantage of trading using opposite LG Energy and Hyundai positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LG Energy position performs unexpectedly, Hyundai 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 Hyundai will offset losses from the drop in Hyundai's long position.The idea behind LG Energy Solution and Hyundai Motor Co 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.| Hyundai vs. Lake Materials Co | Hyundai vs. KB Financial Group | Hyundai vs. Jeju Air Co | Hyundai vs. LAKE MATERIALS LTD |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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