Correlation Between LG Electronics and Stanley Black
Can any of the company-specific risk be diversified away by investing in both LG Electronics and Stanley Black 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 Stanley Black into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LG Electronics and Stanley Black Decker, you can compare the effects of market volatilities on LG Electronics and Stanley Black 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 Stanley Black. Check out your portfolio center. Please also check ongoing floating volatility patterns of LG Electronics and Stanley Black.
Diversification Opportunities for LG Electronics and Stanley Black
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between LGLG and Stanley is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding LG Electronics and Stanley Black Decker in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stanley Black Decker 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 Stanley Black. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stanley Black Decker has no effect on the direction of LG Electronics i.e., LG Electronics and Stanley Black go up and down completely randomly.
Pair Corralation between LG Electronics and Stanley Black
Assuming the 90 days trading horizon LG Electronics is expected to generate 0.74 times more return on investment than Stanley Black. However, LG Electronics is 1.34 times less risky than Stanley Black. It trades about -0.24 of its potential returns per unit of risk. Stanley Black Decker is currently generating about -0.39 per unit of risk. If you would invest 1,140 in LG Electronics on January 12, 2025 and sell it today you would lose (165.00) from holding LG Electronics or give up 14.47% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.65% |
| Values | Daily Returns |
LG Electronics vs. Stanley Black Decker
Performance |
| Timeline |
| LG Electronics |
| Stanley Black Decker |
LG Electronics and Stanley Black Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LG Electronics and Stanley Black
The main advantage of trading using opposite LG Electronics and Stanley Black positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LG Electronics position performs unexpectedly, Stanley Black 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 Stanley Black will offset losses from the drop in Stanley Black's long position.| LG Electronics vs. Westinghouse Air Brake | LG Electronics vs. ALTAIR RES INC | LG Electronics vs. QLEANAIR AB SK 50 | LG Electronics vs. Wizz Air Holdings |
| Stanley Black vs. Techtronic Industries | Stanley Black vs. Snap on Incorporated | Stanley Black vs. Toro Co | Stanley Black vs. Lincoln Electric Holdings |
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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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