Correlation Between LG Energy and Korea Information
Can any of the company-specific risk be diversified away by investing in both LG Energy and Korea Information 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 Korea Information 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 Korea Information Engineering, you can compare the effects of market volatilities on LG Energy and Korea Information 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 Korea Information. Check out your portfolio center. Please also check ongoing floating volatility patterns of LG Energy and Korea Information.
Diversification Opportunities for LG Energy and Korea Information
0.3 | Correlation Coefficient |
Weak diversification
The 3 months correlation between 373220 and Korea is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding LG Energy Solution and Korea Information Engineering in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Korea Information 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 Korea Information. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Korea Information has no effect on the direction of LG Energy i.e., LG Energy and Korea Information go up and down completely randomly.
Pair Corralation between LG Energy and Korea Information
Assuming the 90 days trading horizon LG Energy Solution is expected to under-perform the Korea Information. In addition to that, LG Energy is 1.16 times more volatile than Korea Information Engineering. It trades about -0.14 of its total potential returns per unit of risk. Korea Information Engineering is currently generating about 0.15 per unit of volatility. If you would invest 248,000 in Korea Information Engineering on September 13, 2024 and sell it today you would earn a total of 23,000 from holding Korea Information Engineering or generate 9.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
LG Energy Solution vs. Korea Information Engineering
Performance |
| Timeline |
| LG Energy Solution |
| Korea Information |
LG Energy and Korea Information Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LG Energy and Korea Information
The main advantage of trading using opposite LG Energy and Korea Information positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LG Energy position performs unexpectedly, Korea Information 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 Korea Information will offset losses from the drop in Korea Information's long position.| LG Energy vs. Daejung Chemicals Metals | LG Energy vs. Youngsin Metal Industrial | LG Energy vs. Seoul Electronics Telecom | LG Energy vs. ITM Semiconductor Co |
| Korea Information vs. Cube Entertainment | Korea Information vs. Dreamus Company | Korea Information vs. LG Energy Solution | Korea Information 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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