Correlation Between LPKF Laser and LG Electronics
Can any of the company-specific risk be diversified away by investing in both LPKF Laser and LG 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 LPKF Laser and LG Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LPKF Laser Electronics and LG Electronics, you can compare the effects of market volatilities on LPKF Laser and LG 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 LPKF Laser with a short position of LG Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of LPKF Laser and LG Electronics.
Diversification Opportunities for LPKF Laser and LG Electronics
0.08 | Correlation Coefficient |
Significant diversification
The 3 months correlation between LPKF and LGLG is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding LPKF Laser Electronics and LG Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LG Electronics and LPKF Laser 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 LPKF Laser Electronics are associated (or correlated) with LG Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LG Electronics has no effect on the direction of LPKF Laser i.e., LPKF Laser and LG Electronics go up and down completely randomly.
Pair Corralation between LPKF Laser and LG Electronics
Assuming the 90 days horizon LPKF Laser Electronics is expected to under-perform the LG Electronics. But the stock apears to be less risky and, when comparing its historical volatility, LPKF Laser Electronics is 1.69 times less risky than LG Electronics. The stock trades about -0.16 of its potential returns per unit of risk. The LG Electronics is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest 1,480 in LG Electronics on August 30, 2024 and sell it today you would lose (30.00) from holding LG Electronics or give up 2.03% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
LPKF Laser Electronics vs. LG Electronics
Performance |
| Timeline |
| LPKF Laser Electronics |
| LG Electronics |
LPKF Laser and LG Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LPKF Laser and LG Electronics
The main advantage of trading using opposite LPKF Laser and LG Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LPKF Laser position performs unexpectedly, LG 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 LG Electronics will offset losses from the drop in LG Electronics' long position.| LPKF Laser vs. Lion One Metals | LPKF Laser vs. Gol Intelligent Airlines | LPKF Laser vs. Sunny Optical Technology | LPKF Laser vs. DXC Technology Co |
| LG Electronics vs. Apple Inc | LG Electronics vs. Apple Inc | LG Electronics vs. Apple Inc | LG Electronics vs. Apple Inc |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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