Correlation Between LG Electronics and Samsung Electronics
Can any of the company-specific risk be diversified away by investing in both LG Electronics and Samsung Electronics 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 Samsung Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LG Electronics and Samsung Electronics Co, you can compare the effects of market volatilities on LG Electronics and Samsung Electronics 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 Samsung Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of LG Electronics and Samsung Electronics.
Diversification Opportunities for LG Electronics and Samsung Electronics
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between LGLG and Samsung is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding LG Electronics and Samsung Electronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Samsung Electronics 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 Samsung Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Samsung Electronics has no effect on the direction of LG Electronics i.e., LG Electronics and Samsung Electronics go up and down completely randomly.
Pair Corralation between LG Electronics and Samsung Electronics
Assuming the 90 days trading horizon LG Electronics is expected to generate 1.55 times more return on investment than Samsung Electronics. However, LG Electronics is 1.55 times more volatile than Samsung Electronics Co. It trades about 0.01 of its potential returns per unit of risk. Samsung Electronics Co is currently generating about 0.0 per unit of risk. If you would invest 1,425 in LG Electronics on September 12, 2024 and sell it today you would lose (95.00) from holding LG Electronics or give up 6.67% 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. Samsung Electronics Co
Performance |
| Timeline |
| LG Electronics |
| Samsung Electronics |
LG Electronics and Samsung Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LG Electronics and Samsung Electronics
The main advantage of trading using opposite LG Electronics and Samsung Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LG Electronics position performs unexpectedly, Samsung Electronics 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 Samsung Electronics will offset losses from the drop in Samsung Electronics' long position.| LG Electronics vs. Samsung Electronics Co | LG Electronics vs. Samsung Electronics Co | LG Electronics vs. Sony Group | LG Electronics vs. Superior Plus Corp |
| Samsung Electronics vs. Align Technology | Samsung Electronics vs. Vishay Intertechnology | Samsung Electronics vs. Sunny Optical Technology | Samsung Electronics vs. Nufarm Limited |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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