Correlation Between LG Energy and Techwing
Can any of the company-specific risk be diversified away by investing in both LG Energy and Techwing 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 Techwing 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 Techwing, you can compare the effects of market volatilities on LG Energy and Techwing 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 Techwing. Check out your portfolio center. Please also check ongoing floating volatility patterns of LG Energy and Techwing.
Diversification Opportunities for LG Energy and Techwing
Good diversification
The 3 months correlation between 373220 and Techwing is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding LG Energy Solution and Techwing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Techwing 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 Techwing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Techwing has no effect on the direction of LG Energy i.e., LG Energy and Techwing go up and down completely randomly.
Pair Corralation between LG Energy and Techwing
Assuming the 90 days trading horizon LG Energy Solution is expected to under-perform the Techwing. But the stock apears to be less risky and, when comparing its historical volatility, LG Energy Solution is 2.26 times less risky than Techwing. The stock trades about -0.34 of its potential returns per unit of risk. The Techwing is currently generating about 0.45 of returns per unit of risk over similar time horizon. If you would invest 3,435,000 in Techwing on October 14, 2024 and sell it today you would earn a total of 1,595,000 from holding Techwing or generate 46.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
LG Energy Solution vs. Techwing
Performance |
| Timeline |
| LG Energy Solution |
| Techwing |
LG Energy and Techwing Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LG Energy and Techwing
The main advantage of trading using opposite LG Energy and Techwing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LG Energy position performs unexpectedly, Techwing 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 Techwing will offset losses from the drop in Techwing's long position.| LG Energy vs. Hyundai Engineering Plastics | LG Energy vs. MediaZen | LG Energy vs. LAKE MATERIALS LTD | LG Energy vs. Phoenix Materials Co |
| Techwing vs. KEPCO Engineering Construction | Techwing vs. Hyundai Engineering Construction | Techwing vs. Semyung Electric Machinery | Techwing vs. MediaZen |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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