Correlation Between LG Energy and UIL
Can any of the company-specific risk be diversified away by investing in both LG Energy and UIL 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 UIL 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 UIL Co, you can compare the effects of market volatilities on LG Energy and UIL 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 UIL. Check out your portfolio center. Please also check ongoing floating volatility patterns of LG Energy and UIL.
Diversification Opportunities for LG Energy and UIL
Modest diversification
The 3 months correlation between 373220 and UIL is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding LG Energy Solution and UIL Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UIL 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 UIL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UIL Co has no effect on the direction of LG Energy i.e., LG Energy and UIL go up and down completely randomly.
Pair Corralation between LG Energy and UIL
Assuming the 90 days trading horizon LG Energy is expected to generate 12.82 times less return on investment than UIL. But when comparing it to its historical volatility, LG Energy Solution is 1.26 times less risky than UIL. It trades about 0.0 of its potential returns per unit of risk. UIL Co is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 362,000 in UIL Co on September 14, 2024 and sell it today you would earn a total of 148,000 from holding UIL Co or generate 40.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.79% |
| Values | Daily Returns |
LG Energy Solution vs. UIL Co
Performance |
| Timeline |
| LG Energy Solution |
| UIL Co |
LG Energy and UIL Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LG Energy and UIL
The main advantage of trading using opposite LG Energy and UIL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LG Energy position performs unexpectedly, UIL 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 UIL will offset losses from the drop in UIL's long position.| LG Energy vs. Samyang Foods Co | LG Energy vs. FoodNamoo | LG Energy vs. PNC Technologies co | LG Energy vs. Lion Chemtech 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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