Correlation Between LG Energy and Solution Advanced
Can any of the company-specific risk be diversified away by investing in both LG Energy and Solution Advanced 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 Solution Advanced 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 Solution Advanced Technology, you can compare the effects of market volatilities on LG Energy and Solution Advanced 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 Solution Advanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of LG Energy and Solution Advanced.
Diversification Opportunities for LG Energy and Solution Advanced
0.14 | Correlation Coefficient |
Average diversification
The 3 months correlation between 373220 and Solution is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding LG Energy Solution and Solution Advanced Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solution Advanced 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 Solution Advanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Solution Advanced has no effect on the direction of LG Energy i.e., LG Energy and Solution Advanced go up and down completely randomly.
Pair Corralation between LG Energy and Solution Advanced
Assuming the 90 days trading horizon LG Energy Solution is expected to generate 0.98 times more return on investment than Solution Advanced. However, LG Energy Solution is 1.02 times less risky than Solution Advanced. It trades about -0.03 of its potential returns per unit of risk. Solution Advanced Technology is currently generating about -0.07 per unit of risk. If you would invest 60,900,000 in LG Energy Solution on September 1, 2024 and sell it today you would lose (22,750,000) from holding LG Energy Solution or give up 37.36% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
LG Energy Solution vs. Solution Advanced Technology
Performance |
| Timeline |
| LG Energy Solution |
| Solution Advanced |
LG Energy and Solution Advanced Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LG Energy and Solution Advanced
The main advantage of trading using opposite LG Energy and Solution Advanced positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LG Energy position performs unexpectedly, Solution Advanced 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 Solution Advanced will offset losses from the drop in Solution Advanced's long position.| LG Energy vs. Doosan Heavy Ind | LG Energy vs. Hyosung Heavy Industries | LG Energy vs. Aprogen KIC | LG Energy vs. SNTEnergy Co |
| Solution Advanced vs. Samsung Electronics Co | Solution Advanced vs. Samsung Electronics Co | Solution Advanced vs. LG Energy Solution | Solution Advanced vs. SK Hynix |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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