Correlation Between LG Electronics and China BlueChemical
Can any of the company-specific risk be diversified away by investing in both LG Electronics and China BlueChemical 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 China BlueChemical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LG Electronics and China BlueChemical, you can compare the effects of market volatilities on LG Electronics and China BlueChemical 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 China BlueChemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of LG Electronics and China BlueChemical.
Diversification Opportunities for LG Electronics and China BlueChemical
-0.3 | Correlation Coefficient |
Very good diversification
The 3 months correlation between LGLG and China is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding LG Electronics and China BlueChemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China BlueChemical 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 China BlueChemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China BlueChemical has no effect on the direction of LG Electronics i.e., LG Electronics and China BlueChemical go up and down completely randomly.
Pair Corralation between LG Electronics and China BlueChemical
Assuming the 90 days trading horizon LG Electronics is expected to under-perform the China BlueChemical. But the stock apears to be less risky and, when comparing its historical volatility, LG Electronics is 2.21 times less risky than China BlueChemical. The stock trades about -0.11 of its potential returns per unit of risk. The China BlueChemical is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 22.00 in China BlueChemical on August 27, 2024 and sell it today you would earn a total of 1.00 from holding China BlueChemical or generate 4.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
LG Electronics vs. China BlueChemical
Performance |
| Timeline |
| LG Electronics |
| China BlueChemical |
LG Electronics and China BlueChemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LG Electronics and China BlueChemical
The main advantage of trading using opposite LG Electronics and China BlueChemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LG Electronics position performs unexpectedly, China BlueChemical 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 China BlueChemical will offset losses from the drop in China BlueChemical's long position.| LG Electronics vs. Apple Inc | LG Electronics vs. Apple Inc | LG Electronics vs. Apple Inc | LG Electronics vs. Apple Inc |
| China BlueChemical vs. Superior Plus Corp | China BlueChemical vs. NMI Holdings | China BlueChemical vs. Origin Agritech | China BlueChemical vs. SIVERS SEMICONDUCTORS AB |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
Other Complementary Tools
| Price Ceiling Movement Calculate and plot Price Ceiling Movement for different equity instruments | |
| Performance Analysis Check effects of mean-variance optimization against your current asset allocation | |
| Idea Analyzer Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas | |
| My Watchlist Analysis Analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like | |
| Fundamentals Comparison Compare fundamentals across multiple equities to find investing opportunities |