Correlation Between LG Battery and Xtrackers Nikkei
Can any of the company-specific risk be diversified away by investing in both LG Battery and Xtrackers Nikkei 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 Battery and Xtrackers Nikkei into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LG Battery Value Chain and Xtrackers Nikkei 225, you can compare the effects of market volatilities on LG Battery and Xtrackers Nikkei 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 Battery with a short position of Xtrackers Nikkei. Check out your portfolio center. Please also check ongoing floating volatility patterns of LG Battery and Xtrackers Nikkei.
Diversification Opportunities for LG Battery and Xtrackers Nikkei
0.23 | Correlation Coefficient |
Modest diversification
The 3 months correlation between BATE and Xtrackers is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding LG Battery Value Chain and Xtrackers Nikkei 225 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xtrackers Nikkei 225 and LG Battery 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 Battery Value Chain are associated (or correlated) with Xtrackers Nikkei. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xtrackers Nikkei 225 has no effect on the direction of LG Battery i.e., LG Battery and Xtrackers Nikkei go up and down completely randomly.
Pair Corralation between LG Battery and Xtrackers Nikkei
Assuming the 90 days trading horizon LG Battery Value Chain is expected to under-perform the Xtrackers Nikkei. In addition to that, LG Battery is 1.19 times more volatile than Xtrackers Nikkei 225. It trades about -0.01 of its total potential returns per unit of risk. Xtrackers Nikkei 225 is currently generating about 0.08 per unit of volatility. If you would invest 2,506 in Xtrackers Nikkei 225 on November 5, 2024 and sell it today you would earn a total of 35.00 from holding Xtrackers Nikkei 225 or generate 1.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.24% |
| Values | Daily Returns |
LG Battery Value Chain vs. Xtrackers Nikkei 225
Performance |
| Timeline |
| LG Battery Value |
| Xtrackers Nikkei 225 |
LG Battery and Xtrackers Nikkei Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LG Battery and Xtrackers Nikkei
The main advantage of trading using opposite LG Battery and Xtrackers Nikkei positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LG Battery position performs unexpectedly, Xtrackers Nikkei 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 Xtrackers Nikkei will offset losses from the drop in Xtrackers Nikkei's long position.| LG Battery vs. LG Battery Value Chain | LG Battery vs. iShares Govt Bond | LG Battery vs. Amundi MSCI Europe | LG Battery vs. iShares Global AAA AA |
| Xtrackers Nikkei vs. Xtrackers II Global | Xtrackers Nikkei vs. Xtrackers FTSE | Xtrackers Nikkei vs. Xtrackers SP 500 | Xtrackers Nikkei vs. Xtrackers MSCI |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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