Correlation Between Encavis AG and LG Electronics
Can any of the company-specific risk be diversified away by investing in both Encavis AG 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 Encavis AG and LG Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Encavis AG and LG Electronics, you can compare the effects of market volatilities on Encavis AG 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 Encavis AG with a short position of LG Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Encavis AG and LG Electronics.
Diversification Opportunities for Encavis AG and LG Electronics
0.06 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Encavis and LGLG is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Encavis AG and LG Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LG Electronics and Encavis AG 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 Encavis AG 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 Encavis AG i.e., Encavis AG and LG Electronics go up and down completely randomly.
Pair Corralation between Encavis AG and LG Electronics
Assuming the 90 days trading horizon Encavis AG is expected to generate 0.31 times more return on investment than LG Electronics. However, Encavis AG is 3.2 times less risky than LG Electronics. It trades about 0.02 of its potential returns per unit of risk. LG Electronics is currently generating about -0.19 per unit of risk. If you would invest 1,713 in Encavis AG on September 5, 2024 and sell it today you would earn a total of 3.00 from holding Encavis AG or generate 0.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Encavis AG vs. LG Electronics
Performance |
| Timeline |
| Encavis AG |
| LG Electronics |
Encavis AG and LG Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Encavis AG and LG Electronics
The main advantage of trading using opposite Encavis AG and LG Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Encavis AG 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.| Encavis AG vs. LG Electronics | Encavis AG vs. STMicroelectronics NV | Encavis AG vs. Richardson Electronics | Encavis AG vs. STORE ELECTRONIC |
| 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 CEOs Directory module to screen CEOs from public companies around the world.
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