Correlation Between LG Electronics and STORE ELECTRONIC
Can any of the company-specific risk be diversified away by investing in both LG Electronics and STORE ELECTRONIC 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 STORE ELECTRONIC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LG Electronics and STORE ELECTRONIC, you can compare the effects of market volatilities on LG Electronics and STORE ELECTRONIC 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 STORE ELECTRONIC. Check out your portfolio center. Please also check ongoing floating volatility patterns of LG Electronics and STORE ELECTRONIC.
Diversification Opportunities for LG Electronics and STORE ELECTRONIC
0.53 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between LGLG and STORE is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding LG Electronics and STORE ELECTRONIC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STORE ELECTRONIC 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 STORE ELECTRONIC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STORE ELECTRONIC has no effect on the direction of LG Electronics i.e., LG Electronics and STORE ELECTRONIC go up and down completely randomly.
Pair Corralation between LG Electronics and STORE ELECTRONIC
Assuming the 90 days trading horizon LG Electronics is expected to generate 1.04 times more return on investment than STORE ELECTRONIC. However, LG Electronics is 1.04 times more volatile than STORE ELECTRONIC. It trades about -0.01 of its potential returns per unit of risk. STORE ELECTRONIC is currently generating about -0.08 per unit of risk. If you would invest 1,440 in LG Electronics on September 1, 2024 and sell it today you would lose (10.00) from holding LG Electronics or give up 0.69% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
LG Electronics vs. STORE ELECTRONIC
Performance |
| Timeline |
| LG Electronics |
| STORE ELECTRONIC |
LG Electronics and STORE ELECTRONIC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LG Electronics and STORE ELECTRONIC
The main advantage of trading using opposite LG Electronics and STORE ELECTRONIC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LG Electronics position performs unexpectedly, STORE ELECTRONIC 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 STORE ELECTRONIC will offset losses from the drop in STORE ELECTRONIC's long position.| LG Electronics vs. SCANDMEDICAL SOLDK 040 | LG Electronics vs. Merit Medical Systems | LG Electronics vs. ONWARD MEDICAL BV | LG Electronics vs. Nufarm Limited |
| STORE ELECTRONIC vs. CHIBA BANK | STORE ELECTRONIC vs. WESTLAKE CHEMICAL | STORE ELECTRONIC vs. Heartland Financial USA | STORE ELECTRONIC vs. Mitsui Chemicals |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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