Correlation Between Dupont De and LG Energy
Can any of the company-specific risk be diversified away by investing in both Dupont De and LG Energy 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 Dupont De and LG Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dupont De Nemours and LG Energy Solution, you can compare the effects of market volatilities on Dupont De and LG Energy 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 Dupont De with a short position of LG Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dupont De and LG Energy.
Diversification Opportunities for Dupont De and LG Energy
Very poor diversification
The 3 months correlation between Dupont and 373220 is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Dupont De Nemours and LG Energy Solution in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LG Energy Solution and Dupont De 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 Dupont De Nemours are associated (or correlated) with LG Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LG Energy Solution has no effect on the direction of Dupont De i.e., Dupont De and LG Energy go up and down completely randomly.
Pair Corralation between Dupont De and LG Energy
Allowing for the 90-day total investment horizon Dupont De is expected to generate 1.64 times less return on investment than LG Energy. But when comparing it to its historical volatility, Dupont De Nemours is 2.25 times less risky than LG Energy. It trades about 0.08 of its potential returns per unit of risk. LG Energy Solution is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 34,600,000 in LG Energy Solution on November 2, 2024 and sell it today you would earn a total of 750,000 from holding LG Energy Solution or generate 2.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 94.74% |
| Values | Daily Returns |
Dupont De Nemours vs. LG Energy Solution
Performance |
| Timeline |
| Dupont De Nemours |
| LG Energy Solution |
Dupont De and LG Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dupont De and LG Energy
The main advantage of trading using opposite Dupont De and LG Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dupont De position performs unexpectedly, LG Energy 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 Energy will offset losses from the drop in LG Energy's long position.| Dupont De vs. Eastman Chemical | Dupont De vs. Olin Corporation | Dupont De vs. Cabot | Dupont De vs. Kronos Worldwide |
| LG Energy vs. SCI Information Service | LG Energy vs. Insung Information Co | LG Energy vs. Seoul Food Industrial | LG Energy vs. DataSolution |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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