Correlation Between LG Electronics and ASOS PLC
Can any of the company-specific risk be diversified away by investing in both LG Electronics and ASOS PLC 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 ASOS PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LG Electronics and ASOS PLC, you can compare the effects of market volatilities on LG Electronics and ASOS PLC 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 ASOS PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of LG Electronics and ASOS PLC.
Diversification Opportunities for LG Electronics and ASOS PLC
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between LGLG and ASOS is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding LG Electronics and ASOS PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ASOS PLC 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 ASOS PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ASOS PLC has no effect on the direction of LG Electronics i.e., LG Electronics and ASOS PLC go up and down completely randomly.
Pair Corralation between LG Electronics and ASOS PLC
Assuming the 90 days trading horizon LG Electronics is expected to under-perform the ASOS PLC. But the stock apears to be less risky and, when comparing its historical volatility, LG Electronics is 1.8 times less risky than ASOS PLC. The stock trades about -0.03 of its potential returns per unit of risk. The ASOS PLC is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 449.00 in ASOS PLC on September 12, 2024 and sell it today you would lose (2.00) from holding ASOS PLC or give up 0.45% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
LG Electronics vs. ASOS PLC
Performance |
| Timeline |
| LG Electronics |
| ASOS PLC |
LG Electronics and ASOS PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LG Electronics and ASOS PLC
The main advantage of trading using opposite LG Electronics and ASOS PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LG Electronics position performs unexpectedly, ASOS PLC 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 ASOS PLC will offset losses from the drop in ASOS PLC's long position.| LG Electronics vs. Apple Inc | LG Electronics vs. Apple Inc | LG Electronics vs. Apple Inc | LG Electronics vs. Apple Inc |
| ASOS PLC vs. Virtus Investment Partners | ASOS PLC vs. NH HOTEL GROUP | ASOS PLC vs. INTERCONT HOTELS | ASOS PLC vs. Meli Hotels International |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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