Correlation Between LS Materials and LG Innotek
Can any of the company-specific risk be diversified away by investing in both LS Materials and LG Innotek 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 LS Materials and LG Innotek into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LS Materials and LG Innotek Co, you can compare the effects of market volatilities on LS Materials and LG Innotek 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 LS Materials with a short position of LG Innotek. Check out your portfolio center. Please also check ongoing floating volatility patterns of LS Materials and LG Innotek.
Diversification Opportunities for LS Materials and LG Innotek
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between 417200 and 011070 is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding LS Materials and LG Innotek Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LG Innotek and LS Materials 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 LS Materials are associated (or correlated) with LG Innotek. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LG Innotek has no effect on the direction of LS Materials i.e., LS Materials and LG Innotek go up and down completely randomly.
Pair Corralation between LS Materials and LG Innotek
Assuming the 90 days trading horizon LS Materials is expected to generate 8.0 times more return on investment than LG Innotek. However, LS Materials is 8.0 times more volatile than LG Innotek Co. It trades about 0.05 of its potential returns per unit of risk. LG Innotek Co is currently generating about -0.03 per unit of risk. If you would invest 599,449 in LS Materials on September 13, 2024 and sell it today you would earn a total of 511,551 from holding LS Materials or generate 85.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 51.04% |
| Values | Daily Returns |
LS Materials vs. LG Innotek Co
Performance |
| Timeline |
| LS Materials |
| LG Innotek |
LS Materials and LG Innotek Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LS Materials and LG Innotek
The main advantage of trading using opposite LS Materials and LG Innotek positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LS Materials position performs unexpectedly, LG Innotek 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 Innotek will offset losses from the drop in LG Innotek's long position.| LS Materials vs. Samsung Electronics Co | LS Materials vs. Samsung Electronics Co | LS Materials vs. LG Energy Solution | LS Materials vs. SK Hynix |
| LG Innotek vs. FOODWELL Co | LG Innotek vs. Sam Yang Foods | LG Innotek vs. Ecoplastic | LG Innotek vs. LS Materials |
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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