Correlation Between Performance Food and LG Electronics
Can any of the company-specific risk be diversified away by investing in both Performance Food 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 Performance Food and LG Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Performance Food Group and LG Electronics, you can compare the effects of market volatilities on Performance Food 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 Performance Food with a short position of LG Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Performance Food and LG Electronics.
Diversification Opportunities for Performance Food and LG Electronics
-0.81 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Performance and LGLG is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding Performance Food Group and LG Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LG Electronics and Performance Food 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 Performance Food Group 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 Performance Food i.e., Performance Food and LG Electronics go up and down completely randomly.
Pair Corralation between Performance Food and LG Electronics
Assuming the 90 days trading horizon Performance Food Group is expected to generate 0.97 times more return on investment than LG Electronics. However, Performance Food Group is 1.03 times less risky than LG Electronics. It trades about 0.32 of its potential returns per unit of risk. LG Electronics is currently generating about -0.01 per unit of risk. If you would invest 7,450 in Performance Food Group on September 1, 2024 and sell it today you would earn a total of 850.00 from holding Performance Food Group or generate 11.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Performance Food Group vs. LG Electronics
Performance |
| Timeline |
| Performance Food |
| LG Electronics |
Performance Food and LG Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Performance Food and LG Electronics
The main advantage of trading using opposite Performance Food and LG Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Performance Food 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.| Performance Food vs. FANDIFI TECHNOLOGY P | Performance Food vs. Tencent Music Entertainment | Performance Food vs. SCOTT TECHNOLOGY | Performance Food vs. ScanSource |
| LG Electronics vs. SCANDMEDICAL SOLDK 040 | LG Electronics vs. Merit Medical Systems | LG Electronics vs. ONWARD MEDICAL BV | LG 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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