Correlation Between Advanced Medical and LG Electronics

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Can any of the company-specific risk be diversified away by investing in both Advanced Medical 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 Advanced Medical and LG Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Advanced Medical Solutions and LG Electronics, you can compare the effects of market volatilities on Advanced Medical 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 Advanced Medical with a short position of LG Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Advanced Medical and LG Electronics.

Diversification Opportunities for Advanced Medical and LG Electronics

0.0
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Advanced and LGLG is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Advanced Medical Solutions and LG Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LG Electronics and Advanced Medical 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 Advanced Medical Solutions 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 Advanced Medical i.e., Advanced Medical and LG Electronics go up and down completely randomly.

Pair Corralation between Advanced Medical and LG Electronics

Assuming the 90 days trading horizon Advanced Medical Solutions is expected to generate 1.03 times more return on investment than LG Electronics. However, Advanced Medical is 1.03 times more volatile than LG Electronics. It trades about 0.01 of its potential returns per unit of risk. LG Electronics is currently generating about -0.01 per unit of risk. If you would invest  242.00  in Advanced Medical Solutions on October 29, 2024 and sell it today you would earn a total of  4.00  from holding Advanced Medical Solutions or generate 1.65% return on investment over 90 days.
Time Period3 Months [change]
DirectionFlat 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Advanced Medical Solutions  vs.  LG Electronics

 Performance 
       Timeline  
Advanced Medical Sol 

Risk-Adjusted Performance

2 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Advanced Medical Solutions are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Advanced Medical may actually be approaching a critical reversion point that can send shares even higher in February 2025.
LG Electronics 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days LG Electronics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Advanced Medical and LG Electronics Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Advanced Medical and LG Electronics

The main advantage of trading using opposite Advanced Medical and LG Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Advanced Medical 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.
The idea behind Advanced Medical Solutions and LG Electronics pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Money Managers module to screen money managers from public funds and ETFs managed around the world.

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