Correlation Between LG Electronics and CAIRN HOMES
Can any of the company-specific risk be diversified away by investing in both LG Electronics and CAIRN HOMES 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 CAIRN HOMES into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LG Electronics and CAIRN HOMES EO, you can compare the effects of market volatilities on LG Electronics and CAIRN HOMES 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 CAIRN HOMES. Check out your portfolio center. Please also check ongoing floating volatility patterns of LG Electronics and CAIRN HOMES.
Diversification Opportunities for LG Electronics and CAIRN HOMES
-0.16 | Correlation Coefficient |
Good diversification
The 3 months correlation between LGLG and CAIRN is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding LG Electronics and CAIRN HOMES EO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CAIRN HOMES EO 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 CAIRN HOMES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CAIRN HOMES EO has no effect on the direction of LG Electronics i.e., LG Electronics and CAIRN HOMES go up and down completely randomly.
Pair Corralation between LG Electronics and CAIRN HOMES
Assuming the 90 days trading horizon LG Electronics is expected to generate 1.15 times more return on investment than CAIRN HOMES. However, LG Electronics is 1.15 times more volatile than CAIRN HOMES EO. It trades about 0.01 of its potential returns per unit of risk. CAIRN HOMES EO is currently generating about -0.07 per unit of risk. If you would invest 1,350 in LG Electronics on November 5, 2024 and sell it today you would earn a total of 0.00 from holding LG Electronics or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
LG Electronics vs. CAIRN HOMES EO
Performance |
| Timeline |
| LG Electronics |
| CAIRN HOMES EO |
LG Electronics and CAIRN HOMES Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LG Electronics and CAIRN HOMES
The main advantage of trading using opposite LG Electronics and CAIRN HOMES positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LG Electronics position performs unexpectedly, CAIRN HOMES 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 CAIRN HOMES will offset losses from the drop in CAIRN HOMES's long position.| LG Electronics vs. Kingdee International Software | LG Electronics vs. PKSHA TECHNOLOGY INC | LG Electronics vs. Bio Techne Corp | LG Electronics vs. VELA TECHNOLPLC LS 0001 |
| CAIRN HOMES vs. OURGAME INTHOLDL 00005 | CAIRN HOMES vs. GALENA MINING LTD | CAIRN HOMES vs. Zijin Mining Group | CAIRN HOMES vs. PLAYMATES TOYS |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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