Correlation Between LG Electronics and Talanx AG
Can any of the company-specific risk be diversified away by investing in both LG Electronics and Talanx AG 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 Talanx AG into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LG Electronics and Talanx AG, you can compare the effects of market volatilities on LG Electronics and Talanx AG 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 Talanx AG. Check out your portfolio center. Please also check ongoing floating volatility patterns of LG Electronics and Talanx AG.
Diversification Opportunities for LG Electronics and Talanx AG
0.28 | Correlation Coefficient |
Modest diversification
The 3 months correlation between LGLG and Talanx is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding LG Electronics and Talanx AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Talanx AG 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 Talanx AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Talanx AG has no effect on the direction of LG Electronics i.e., LG Electronics and Talanx AG go up and down completely randomly.
Pair Corralation between LG Electronics and Talanx AG
Assuming the 90 days trading horizon LG Electronics is expected to generate 9.64 times less return on investment than Talanx AG. In addition to that, LG Electronics is 1.42 times more volatile than Talanx AG. It trades about 0.01 of its total potential returns per unit of risk. Talanx AG is currently generating about 0.09 per unit of volatility. If you would invest 5,785 in Talanx AG on August 25, 2024 and sell it today you would earn a total of 2,100 from holding Talanx AG or generate 36.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.64% |
| Values | Daily Returns |
LG Electronics vs. Talanx AG
Performance |
| Timeline |
| LG Electronics |
| Talanx AG |
LG Electronics and Talanx AG Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LG Electronics and Talanx AG
The main advantage of trading using opposite LG Electronics and Talanx AG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LG Electronics position performs unexpectedly, Talanx AG 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 Talanx AG will offset losses from the drop in Talanx AG's long position.| LG Electronics vs. AUTO TRADER ADR | LG Electronics vs. TRADEDOUBLER AB SK | LG Electronics vs. Auto Trader Group | LG Electronics vs. MHP Hotel AG |
| Talanx AG vs. KIMBALL ELECTRONICS | Talanx AG vs. AVITA Medical | Talanx AG vs. Avanos Medical | Talanx AG vs. LG Electronics |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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