Correlation Between STMICROELECTRONICS and LG Electronics
Can any of the company-specific risk be diversified away by investing in both STMICROELECTRONICS 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 STMICROELECTRONICS and LG Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between STMICROELECTRONICS and LG Electronics, you can compare the effects of market volatilities on STMICROELECTRONICS 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 STMICROELECTRONICS with a short position of LG Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of STMICROELECTRONICS and LG Electronics.
Diversification Opportunities for STMICROELECTRONICS and LG Electronics
0.47 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between STMICROELECTRONICS and LGLG is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding STMICROELECTRONICS and LG Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LG Electronics and STMICROELECTRONICS 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 STMICROELECTRONICS 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 STMICROELECTRONICS i.e., STMICROELECTRONICS and LG Electronics go up and down completely randomly.
Pair Corralation between STMICROELECTRONICS and LG Electronics
Assuming the 90 days trading horizon STMICROELECTRONICS is expected to under-perform the LG Electronics. In addition to that, STMICROELECTRONICS is 1.02 times more volatile than LG Electronics. It trades about -0.02 of its total potential returns per unit of risk. LG Electronics is currently generating about 0.0 per unit of volatility. If you would invest 1,452 in LG Electronics on September 23, 2024 and sell it today you would lose (132.00) from holding LG Electronics or give up 9.09% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
STMICROELECTRONICS vs. LG Electronics
Performance |
| Timeline |
| STMICROELECTRONICS |
| LG Electronics |
STMICROELECTRONICS and LG Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with STMICROELECTRONICS and LG Electronics
The main advantage of trading using opposite STMICROELECTRONICS and LG Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if STMICROELECTRONICS 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.| STMICROELECTRONICS vs. Apple Inc | STMICROELECTRONICS vs. Apple Inc | STMICROELECTRONICS vs. Apple Inc | STMICROELECTRONICS vs. Apple Inc |
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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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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