Correlation Between LG Energy and BH Co
Can any of the company-specific risk be diversified away by investing in both LG Energy and BH Co 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 BH Co 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 BH Co, you can compare the effects of market volatilities on LG Energy and BH Co 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 BH Co. Check out your portfolio center. Please also check ongoing floating volatility patterns of LG Energy and BH Co.
Diversification Opportunities for LG Energy and BH Co
Average diversification
The 3 months correlation between 373220 and 090460 is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding LG Energy Solution and BH Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BH 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 BH Co. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BH Co has no effect on the direction of LG Energy i.e., LG Energy and BH Co go up and down completely randomly.
Pair Corralation between LG Energy and BH Co
Assuming the 90 days trading horizon LG Energy Solution is expected to under-perform the BH Co. In addition to that, LG Energy is 1.17 times more volatile than BH Co. It trades about -0.04 of its total potential returns per unit of risk. BH Co is currently generating about 0.03 per unit of volatility. If you would invest 1,576,000 in BH Co on September 13, 2024 and sell it today you would earn a total of 15,000 from holding BH Co or generate 0.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
LG Energy Solution vs. BH Co
Performance |
| Timeline |
| LG Energy Solution |
| BH Co |
LG Energy and BH Co Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LG Energy and BH Co
The main advantage of trading using opposite LG Energy and BH Co positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LG Energy position performs unexpectedly, BH Co 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 BH Co will offset losses from the drop in BH Co'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 |
| BH Co vs. Cube Entertainment | BH Co vs. Dreamus Company | BH Co vs. LG Energy Solution | BH Co 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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