Correlation Between LG Energy and Woori Technology
Can any of the company-specific risk be diversified away by investing in both LG Energy and Woori Technology 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 Woori Technology 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 Woori Technology Investment, you can compare the effects of market volatilities on LG Energy and Woori Technology 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 Woori Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of LG Energy and Woori Technology.
Diversification Opportunities for LG Energy and Woori Technology
0.09 | Correlation Coefficient |
Significant diversification
The 3 months correlation between 373220 and Woori is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding LG Energy Solution and Woori Technology Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Woori Technology Inv 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 Woori Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Woori Technology Inv has no effect on the direction of LG Energy i.e., LG Energy and Woori Technology go up and down completely randomly.
Pair Corralation between LG Energy and Woori Technology
Assuming the 90 days trading horizon LG Energy Solution is expected to generate 0.71 times more return on investment than Woori Technology. However, LG Energy Solution is 1.41 times less risky than Woori Technology. It trades about 0.05 of its potential returns per unit of risk. Woori Technology Investment is currently generating about 0.02 per unit of risk. If you would invest 33,200,000 in LG Energy Solution on September 1, 2024 and sell it today you would earn a total of 4,950,000 from holding LG Energy Solution or generate 14.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
LG Energy Solution vs. Woori Technology Investment
Performance |
| Timeline |
| LG Energy Solution |
| Woori Technology Inv |
LG Energy and Woori Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LG Energy and Woori Technology
The main advantage of trading using opposite LG Energy and Woori Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LG Energy position performs unexpectedly, Woori Technology 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 Woori Technology will offset losses from the drop in Woori Technology'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 |
| Woori Technology vs. Samsung Electronics Co | Woori Technology vs. Samsung Electronics Co | Woori Technology vs. KB Financial Group | Woori Technology vs. Shinhan Financial Group |
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 Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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