Correlation Between LG Electronics and CARSALES
Can any of the company-specific risk be diversified away by investing in both LG Electronics and CARSALES 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 CARSALES into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LG Electronics and CARSALESCOM, you can compare the effects of market volatilities on LG Electronics and CARSALES 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 CARSALES. Check out your portfolio center. Please also check ongoing floating volatility patterns of LG Electronics and CARSALES.
Diversification Opportunities for LG Electronics and CARSALES
-0.67 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between LGLG and CARSALES is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding LG Electronics and CARSALESCOM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CARSALESCOM 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 CARSALES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CARSALESCOM has no effect on the direction of LG Electronics i.e., LG Electronics and CARSALES go up and down completely randomly.
Pair Corralation between LG Electronics and CARSALES
Assuming the 90 days trading horizon LG Electronics is expected to under-perform the CARSALES. In addition to that, LG Electronics is 2.0 times more volatile than CARSALESCOM. It trades about -0.11 of its total potential returns per unit of risk. CARSALESCOM is currently generating about 0.41 per unit of volatility. If you would invest 2,280 in CARSALESCOM on September 4, 2024 and sell it today you would earn a total of 280.00 from holding CARSALESCOM or generate 12.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
LG Electronics vs. CARSALESCOM
Performance |
| Timeline |
| LG Electronics |
| CARSALESCOM |
LG Electronics and CARSALES Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LG Electronics and CARSALES
The main advantage of trading using opposite LG Electronics and CARSALES positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LG Electronics position performs unexpectedly, CARSALES 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 CARSALES will offset losses from the drop in CARSALES's long position.| LG Electronics vs. CARSALESCOM | LG Electronics vs. ANTA SPORTS PRODUCT | LG Electronics vs. CODERE ONLINE LUX | LG Electronics vs. CarsalesCom |
| CARSALES vs. Mitsui Chemicals | CARSALES vs. USWE SPORTS AB | CARSALES vs. PLAYTIKA HOLDING DL 01 | CARSALES vs. COVIVIO HOTELS INH |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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