Correlation Between LG Energy and Top Material
Can any of the company-specific risk be diversified away by investing in both LG Energy and Top Material 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 Top Material 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 Top Material Co, you can compare the effects of market volatilities on LG Energy and Top Material 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 Top Material. Check out your portfolio center. Please also check ongoing floating volatility patterns of LG Energy and Top Material.
Diversification Opportunities for LG Energy and Top Material
-0.31 | Correlation Coefficient |
Very good diversification
The 3 months correlation between 373220 and Top is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding LG Energy Solution and Top Material Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Top Material 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 Top Material. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Top Material has no effect on the direction of LG Energy i.e., LG Energy and Top Material go up and down completely randomly.
Pair Corralation between LG Energy and Top Material
Assuming the 90 days trading horizon LG Energy Solution is expected to generate 1.08 times more return on investment than Top Material. However, LG Energy is 1.08 times more volatile than Top Material Co. It trades about 0.01 of its potential returns per unit of risk. Top Material Co is currently generating about -0.07 per unit of risk. If you would invest 40,650,000 in LG Energy Solution on August 25, 2024 and sell it today you would lose (150,000) from holding LG Energy Solution or give up 0.37% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
LG Energy Solution vs. Top Material Co
Performance |
| Timeline |
| LG Energy Solution |
| Top Material |
LG Energy and Top Material Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LG Energy and Top Material
The main advantage of trading using opposite LG Energy and Top Material positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LG Energy position performs unexpectedly, Top Material 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 Top Material will offset losses from the drop in Top Material's long position.| LG Energy vs. Miwon Chemicals Co | LG Energy vs. Daiyang Metal Co | LG Energy vs. PJ Metal Co | LG Energy vs. Eagon Industrial Co |
| Top Material vs. Tuksu Engineering ConstructionLtd | Top Material vs. Polaris Office Corp | Top Material vs. Daekyung Machinery Engineering | Top Material vs. ENERGYMACHINERY KOREA CoLtd |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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