Correlation Between LG Energy and NOVATECH
Can any of the company-specific risk be diversified away by investing in both LG Energy and NOVATECH 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 NOVATECH 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 NOVATECH Co, you can compare the effects of market volatilities on LG Energy and NOVATECH 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 NOVATECH. Check out your portfolio center. Please also check ongoing floating volatility patterns of LG Energy and NOVATECH.
Diversification Opportunities for LG Energy and NOVATECH
Pay attention - limited upside
The 3 months correlation between 373220 and NOVATECH is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding LG Energy Solution and NOVATECH Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NOVATECH 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 NOVATECH. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NOVATECH has no effect on the direction of LG Energy i.e., LG Energy and NOVATECH go up and down completely randomly.
Pair Corralation between LG Energy and NOVATECH
Assuming the 90 days trading horizon LG Energy Solution is expected to generate 1.9 times more return on investment than NOVATECH. However, LG Energy is 1.9 times more volatile than NOVATECH Co. It trades about 0.16 of its potential returns per unit of risk. NOVATECH Co is currently generating about -0.21 per unit of risk. If you would invest 35,350,000 in LG Energy Solution on November 25, 2024 and sell it today you would earn a total of 2,500,000 from holding LG Energy Solution or generate 7.07% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
LG Energy Solution vs. NOVATECH Co
Performance |
Timeline |
LG Energy Solution |
NOVATECH |
LG Energy and NOVATECH Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with LG Energy and NOVATECH
The main advantage of trading using opposite LG Energy and NOVATECH positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LG Energy position performs unexpectedly, NOVATECH 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 NOVATECH will offset losses from the drop in NOVATECH's long position.LG Energy vs. Lee Ku Industrial | ||
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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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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