Correlation Between LG Electronics and Eidesvik Offshore
Can any of the company-specific risk be diversified away by investing in both LG Electronics and Eidesvik Offshore 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 Eidesvik Offshore into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LG Electronics and Eidesvik Offshore ASA, you can compare the effects of market volatilities on LG Electronics and Eidesvik Offshore 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 Eidesvik Offshore. Check out your portfolio center. Please also check ongoing floating volatility patterns of LG Electronics and Eidesvik Offshore.
Diversification Opportunities for LG Electronics and Eidesvik Offshore
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between LGLG and Eidesvik is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding LG Electronics and Eidesvik Offshore ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eidesvik Offshore ASA 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 Eidesvik Offshore. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eidesvik Offshore ASA has no effect on the direction of LG Electronics i.e., LG Electronics and Eidesvik Offshore go up and down completely randomly.
Pair Corralation between LG Electronics and Eidesvik Offshore
Assuming the 90 days trading horizon LG Electronics is expected to generate 0.94 times more return on investment than Eidesvik Offshore. However, LG Electronics is 1.07 times less risky than Eidesvik Offshore. It trades about -0.06 of its potential returns per unit of risk. Eidesvik Offshore ASA is currently generating about -0.1 per unit of risk. If you would invest 1,590 in LG Electronics on September 3, 2024 and sell it today you would lose (140.00) from holding LG Electronics or give up 8.81% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
LG Electronics vs. Eidesvik Offshore ASA
Performance |
| Timeline |
| LG Electronics |
| Eidesvik Offshore ASA |
LG Electronics and Eidesvik Offshore Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LG Electronics and Eidesvik Offshore
The main advantage of trading using opposite LG Electronics and Eidesvik Offshore positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LG Electronics position performs unexpectedly, Eidesvik Offshore 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 Eidesvik Offshore will offset losses from the drop in Eidesvik Offshore's long position.| LG Electronics vs. Eidesvik Offshore ASA | LG Electronics vs. SK TELECOM TDADR | LG Electronics vs. Solstad Offshore ASA | LG Electronics vs. SBM OFFSHORE |
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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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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