Correlation Between PT Bank and LG Electronics
Can any of the company-specific risk be diversified away by investing in both PT Bank 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 PT Bank and LG Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PT Bank Mandiri and LG Electronics, you can compare the effects of market volatilities on PT Bank 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 PT Bank with a short position of LG Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of PT Bank and LG Electronics.
Diversification Opportunities for PT Bank and LG Electronics
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between PQ9 and LGLG is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding PT Bank Mandiri and LG Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LG Electronics and PT Bank 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 PT Bank Mandiri 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 PT Bank i.e., PT Bank and LG Electronics go up and down completely randomly.
Pair Corralation between PT Bank and LG Electronics
Assuming the 90 days horizon PT Bank Mandiri is expected to generate 1.79 times more return on investment than LG Electronics. However, PT Bank is 1.79 times more volatile than LG Electronics. It trades about -0.01 of its potential returns per unit of risk. LG Electronics is currently generating about -0.05 per unit of risk. If you would invest 39.00 in PT Bank Mandiri on November 2, 2024 and sell it today you would lose (5.00) from holding PT Bank Mandiri or give up 12.82% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.04% |
| Values | Daily Returns |
PT Bank Mandiri vs. LG Electronics
Performance |
| Timeline |
| PT Bank Mandiri |
| LG Electronics |
PT Bank and LG Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PT Bank and LG Electronics
The main advantage of trading using opposite PT Bank and LG Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PT Bank 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.| PT Bank vs. NAKED WINES PLC | PT Bank vs. Altair Engineering | PT Bank vs. IMPERIAL TOBACCO | PT Bank vs. VIVA WINE GROUP |
| LG Electronics vs. Apple Inc | LG Electronics vs. Apple Inc | LG Electronics vs. Samsung Electronics Co | LG Electronics vs. Sony Group Corp |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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