Correlation Between LG Energy and BYON
Can any of the company-specific risk be diversified away by investing in both LG Energy and BYON 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 BYON 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 BYON Co, you can compare the effects of market volatilities on LG Energy and BYON 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 BYON. Check out your portfolio center. Please also check ongoing floating volatility patterns of LG Energy and BYON.
Diversification Opportunities for LG Energy and BYON
Very good diversification
The 3 months correlation between 373220 and BYON is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding LG Energy Solution and BYON Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BYON 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 BYON. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BYON has no effect on the direction of LG Energy i.e., LG Energy and BYON go up and down completely randomly.
Pair Corralation between LG Energy and BYON
Assuming the 90 days trading horizon LG Energy Solution is expected to under-perform the BYON. But the stock apears to be less risky and, when comparing its historical volatility, LG Energy Solution is 1.48 times less risky than BYON. The stock trades about -0.05 of its potential returns per unit of risk. The BYON Co is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest 62,000 in BYON Co on September 1, 2024 and sell it today you would earn a total of 21,000 from holding BYON Co or generate 33.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
LG Energy Solution vs. BYON Co
Performance |
| Timeline |
| LG Energy Solution |
| BYON |
LG Energy and BYON Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LG Energy and BYON
The main advantage of trading using opposite LG Energy and BYON positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LG Energy position performs unexpectedly, BYON 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 BYON will offset losses from the drop in BYON's long position.| LG Energy vs. Doosan Heavy Ind | LG Energy vs. Hyosung Heavy Industries | LG Energy vs. Aprogen KIC | LG Energy vs. SNTEnergy 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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