Correlation Between LG Energy and J Steel
Can any of the company-specific risk be diversified away by investing in both LG Energy and J Steel 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 J Steel 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 J Steel Co, you can compare the effects of market volatilities on LG Energy and J Steel 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 J Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of LG Energy and J Steel.
Diversification Opportunities for LG Energy and J Steel
Poor diversification
The 3 months correlation between 373220 and 023440 is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding LG Energy Solution and J Steel Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on J Steel 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 J Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of J Steel has no effect on the direction of LG Energy i.e., LG Energy and J Steel go up and down completely randomly.
Pair Corralation between LG Energy and J Steel
Assuming the 90 days trading horizon LG Energy Solution is expected to generate 1.54 times more return on investment than J Steel. However, LG Energy is 1.54 times more volatile than J Steel Co. It trades about -0.05 of its potential returns per unit of risk. J Steel Co is currently generating about -0.39 per unit of risk. If you would invest 36,150,000 in LG Energy Solution on November 5, 2024 and sell it today you would lose (950,000) from holding LG Energy Solution or give up 2.63% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
LG Energy Solution vs. J Steel Co
Performance |
| Timeline |
| LG Energy Solution |
| J Steel |
LG Energy and J Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LG Energy and J Steel
The main advantage of trading using opposite LG Energy and J Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LG Energy position performs unexpectedly, J Steel 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 J Steel will offset losses from the drop in J Steel's long position.| LG Energy vs. Korean Air Lines | LG Energy vs. Kukil Metal Co | LG Energy vs. Seoyon Topmetal Co | LG Energy vs. Lee Ku Industrial |
| J Steel vs. KT Submarine Telecom | J Steel vs. Daishin Information Communications | J Steel vs. Seoul Semiconductor Co | J Steel vs. Automobile Pc |
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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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