Correlation Between LG Energy and System
Can any of the company-specific risk be diversified away by investing in both LG Energy and System 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 System 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 System and Application, you can compare the effects of market volatilities on LG Energy and System 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 System. Check out your portfolio center. Please also check ongoing floating volatility patterns of LG Energy and System.
Diversification Opportunities for LG Energy and System
Average diversification
The 3 months correlation between 373220 and System is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding LG Energy Solution and System and Application in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on System and Application 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 System. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of System and Application has no effect on the direction of LG Energy i.e., LG Energy and System go up and down completely randomly.
Pair Corralation between LG Energy and System
Assuming the 90 days trading horizon LG Energy Solution is expected to under-perform the System. But the stock apears to be less risky and, when comparing its historical volatility, LG Energy Solution is 1.58 times less risky than System. The stock trades about -0.14 of its potential returns per unit of risk. The System and Application is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest 136,900 in System and Application on September 13, 2024 and sell it today you would earn a total of 29,600 from holding System and Application or generate 21.62% 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. System and Application
Performance |
| Timeline |
| LG Energy Solution |
| System and Application |
LG Energy and System Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LG Energy and System
The main advantage of trading using opposite LG Energy and System positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LG Energy position performs unexpectedly, System 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 System will offset losses from the drop in System'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 |
| System vs. Cube Entertainment | System vs. Dreamus Company | System vs. LG Energy Solution | System 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 Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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