Correlation Between Global Ship and LG Electronics
Can any of the company-specific risk be diversified away by investing in both Global Ship and LG Electronics 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 Global Ship and LG Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Global Ship Lease and LG Electronics, you can compare the effects of market volatilities on Global Ship and LG Electronics 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 Global Ship with a short position of LG Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Ship and LG Electronics.
Diversification Opportunities for Global Ship and LG Electronics
0.09 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Global and LGLG is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Global Ship Lease and LG Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LG Electronics and Global Ship 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 Global Ship Lease are associated (or correlated) with LG Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LG Electronics has no effect on the direction of Global Ship i.e., Global Ship and LG Electronics go up and down completely randomly.
Pair Corralation between Global Ship and LG Electronics
Assuming the 90 days horizon Global Ship Lease is expected to under-perform the LG Electronics. In addition to that, Global Ship is 1.11 times more volatile than LG Electronics. It trades about -0.04 of its total potential returns per unit of risk. LG Electronics is currently generating about -0.03 per unit of volatility. If you would invest 1,470 in LG Electronics on August 28, 2024 and sell it today you would lose (20.00) from holding LG Electronics or give up 1.36% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Global Ship Lease vs. LG Electronics
Performance |
| Timeline |
| Global Ship Lease |
| LG Electronics |
Global Ship and LG Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Global Ship and LG Electronics
The main advantage of trading using opposite Global Ship and LG Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global Ship position performs unexpectedly, LG Electronics 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 LG Electronics will offset losses from the drop in LG Electronics' long position.| Global Ship vs. MeVis Medical Solutions | Global Ship vs. Apollo Medical Holdings | Global Ship vs. G III Apparel Group | Global Ship vs. Advanced Medical Solutions |
| LG Electronics vs. Apple Inc | LG Electronics vs. Apple Inc | LG Electronics vs. Apple Inc | LG Electronics vs. Apple Inc |
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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