Correlation Between LG Energy and ICD
Can any of the company-specific risk be diversified away by investing in both LG Energy and ICD 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 ICD 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 ICD Co, you can compare the effects of market volatilities on LG Energy and ICD 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 ICD. Check out your portfolio center. Please also check ongoing floating volatility patterns of LG Energy and ICD.
Diversification Opportunities for LG Energy and ICD
Excellent diversification
The 3 months correlation between 373220 and ICD is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding LG Energy Solution and ICD Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ICD Co 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 ICD. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ICD Co has no effect on the direction of LG Energy i.e., LG Energy and ICD go up and down completely randomly.
Pair Corralation between LG Energy and ICD
Assuming the 90 days trading horizon LG Energy Solution is expected to under-perform the ICD. In addition to that, LG Energy is 1.49 times more volatile than ICD Co. It trades about -0.02 of its total potential returns per unit of risk. ICD Co is currently generating about -0.02 per unit of volatility. If you would invest 478,000 in ICD Co on August 27, 2024 and sell it today you would lose (8,000) from holding ICD Co or give up 1.67% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
LG Energy Solution vs. ICD Co
Performance |
| Timeline |
| LG Energy Solution |
| ICD Co |
LG Energy and ICD Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LG Energy and ICD
The main advantage of trading using opposite LG Energy and ICD positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LG Energy position performs unexpectedly, ICD 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 ICD will offset losses from the drop in ICD's long position.| LG Energy vs. Kisan Telecom Co | LG Energy vs. INNOX Advanced Materials | LG Energy vs. Daejoo Electronic Materials | LG Energy vs. Daishin Information Communications |
| ICD vs. Samsung Electronics Co | ICD vs. Samsung Electronics Co | ICD vs. LG Energy Solution | ICD vs. SK Hynix |
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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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