Correlation Between LG Electronics and Meiko Electronics
Can any of the company-specific risk be diversified away by investing in both LG Electronics and Meiko 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 LG Electronics and Meiko Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LG Electronics and Meiko Electronics Co, you can compare the effects of market volatilities on LG Electronics and Meiko 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 LG Electronics with a short position of Meiko Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of LG Electronics and Meiko Electronics.
Diversification Opportunities for LG Electronics and Meiko Electronics
-0.42 | Correlation Coefficient |
Very good diversification
The 3 months correlation between LGLG and Meiko is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding LG Electronics and Meiko Electronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Meiko Electronics 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 Meiko Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Meiko Electronics has no effect on the direction of LG Electronics i.e., LG Electronics and Meiko Electronics go up and down completely randomly.
Pair Corralation between LG Electronics and Meiko Electronics
Assuming the 90 days trading horizon LG Electronics is expected to under-perform the Meiko Electronics. In addition to that, LG Electronics is 1.03 times more volatile than Meiko Electronics Co. It trades about -0.1 of its total potential returns per unit of risk. Meiko Electronics Co is currently generating about -0.03 per unit of volatility. If you would invest 5,600 in Meiko Electronics Co on November 2, 2024 and sell it today you would lose (100.00) from holding Meiko Electronics Co or give up 1.79% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
LG Electronics vs. Meiko Electronics Co
Performance |
| Timeline |
| LG Electronics |
| Meiko Electronics |
LG Electronics and Meiko Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LG Electronics and Meiko Electronics
The main advantage of trading using opposite LG Electronics and Meiko Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LG Electronics position performs unexpectedly, Meiko 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 Meiko Electronics will offset losses from the drop in Meiko Electronics' long position.| LG Electronics vs. Japan Post Insurance | LG Electronics vs. Tower Semiconductor | LG Electronics vs. Semiconductor Manufacturing International | LG Electronics vs. Goosehead Insurance |
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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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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