Correlation Between LG Electronics and Bank of China Limited
Can any of the company-specific risk be diversified away by investing in both LG Electronics and Bank of China Limited 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 Bank of China Limited into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LG Electronics and Bank of China, you can compare the effects of market volatilities on LG Electronics and Bank of China Limited 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 Bank of China Limited. Check out your portfolio center. Please also check ongoing floating volatility patterns of LG Electronics and Bank of China Limited.
Diversification Opportunities for LG Electronics and Bank of China Limited
-0.47 | Correlation Coefficient |
Very good diversification
The 3 months correlation between LGLG and Bank is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding LG Electronics and Bank of China in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of China Limited 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 Bank of China Limited. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank of China Limited has no effect on the direction of LG Electronics i.e., LG Electronics and Bank of China Limited go up and down completely randomly.
Pair Corralation between LG Electronics and Bank of China Limited
Assuming the 90 days trading horizon LG Electronics is expected to generate 4752.5 times less return on investment than Bank of China Limited. But when comparing it to its historical volatility, LG Electronics is 4.87 times less risky than Bank of China Limited. It trades about 0.0 of its potential returns per unit of risk. Bank of China is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 19.00 in Bank of China on September 1, 2024 and sell it today you would earn a total of 24.00 from holding Bank of China or generate 126.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
LG Electronics vs. Bank of China
Performance |
| Timeline |
| LG Electronics |
| Bank of China Limited |
LG Electronics and Bank of China Limited Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LG Electronics and Bank of China Limited
The main advantage of trading using opposite LG Electronics and Bank of China Limited positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LG Electronics position performs unexpectedly, Bank of China Limited 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 Bank of China Limited will offset losses from the drop in Bank of China Limited'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 |
| Bank of China Limited vs. Ming Le Sports | Bank of China Limited vs. NTG Nordic Transport | Bank of China Limited vs. BII Railway Transportation | Bank of China Limited vs. TITANIUM TRANSPORTGROUP |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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