Correlation Between LG Energy and SFA Semicon
Can any of the company-specific risk be diversified away by investing in both LG Energy and SFA Semicon 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 SFA Semicon 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 SFA Semicon Co, you can compare the effects of market volatilities on LG Energy and SFA Semicon 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 SFA Semicon. Check out your portfolio center. Please also check ongoing floating volatility patterns of LG Energy and SFA Semicon.
Diversification Opportunities for LG Energy and SFA Semicon
0.42 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between 373220 and SFA is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding LG Energy Solution and SFA Semicon Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SFA Semicon 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 SFA Semicon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SFA Semicon has no effect on the direction of LG Energy i.e., LG Energy and SFA Semicon go up and down completely randomly.
Pair Corralation between LG Energy and SFA Semicon
Assuming the 90 days trading horizon LG Energy Solution is expected to generate 0.79 times more return on investment than SFA Semicon. However, LG Energy Solution is 1.26 times less risky than SFA Semicon. It trades about 0.0 of its potential returns per unit of risk. SFA Semicon Co is currently generating about -0.04 per unit of risk. If you would invest 44,400,000 in LG Energy Solution on September 15, 2024 and sell it today you would lose (4,400,000) from holding LG Energy Solution or give up 9.91% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.62% |
| Values | Daily Returns |
LG Energy Solution vs. SFA Semicon Co
Performance |
| Timeline |
| LG Energy Solution |
| SFA Semicon |
LG Energy and SFA Semicon Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LG Energy and SFA Semicon
The main advantage of trading using opposite LG Energy and SFA Semicon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LG Energy position performs unexpectedly, SFA Semicon 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 SFA Semicon will offset losses from the drop in SFA Semicon's long position.| LG Energy vs. Doosan Heavy Ind | LG Energy vs. Hyosung Heavy Industries | LG Energy vs. Aprogen KIC | LG Energy vs. Korea Refract |
| SFA Semicon vs. Cube Entertainment | SFA Semicon vs. Dreamus Company | SFA Semicon vs. LG Energy Solution | SFA Semicon vs. Dongwon System |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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