Correlation Between LG Electronics and Apple
Can any of the company-specific risk be diversified away by investing in both LG Electronics and Apple 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 Electronics and Apple into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LG Electronics and Apple Inc, you can compare the effects of market volatilities on LG Electronics and Apple 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 Electronics with a short position of Apple. Check out your portfolio center. Please also check ongoing floating volatility patterns of LG Electronics and Apple.
Diversification Opportunities for LG Electronics and Apple
-0.66 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between LGLG and Apple is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding LG Electronics and Apple Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Apple Inc and LG Electronics 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 Electronics are associated (or correlated) with Apple. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Apple Inc has no effect on the direction of LG Electronics i.e., LG Electronics and Apple go up and down completely randomly.
Pair Corralation between LG Electronics and Apple
Assuming the 90 days trading horizon LG Electronics is expected to under-perform the Apple. In addition to that, LG Electronics is 1.82 times more volatile than Apple Inc. It trades about -0.18 of its total potential returns per unit of risk. Apple Inc is currently generating about 0.57 per unit of volatility. If you would invest 20,296 in Apple Inc on September 4, 2024 and sell it today you would earn a total of 2,514 from holding Apple Inc or generate 12.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
LG Electronics vs. Apple Inc
Performance |
| Timeline |
| LG Electronics |
| Apple Inc |
LG Electronics and Apple Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LG Electronics and Apple
The main advantage of trading using opposite LG Electronics and Apple positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LG Electronics position performs unexpectedly, Apple 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 Apple will offset losses from the drop in Apple's long position.| LG Electronics vs. Apple Inc | LG Electronics vs. Apple Inc | LG Electronics vs. Apple Inc | LG Electronics vs. Apple Inc |
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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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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