Correlation Between Vanguard and LG Battery
Can any of the company-specific risk be diversified away by investing in both Vanguard and LG Battery 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 Vanguard and LG Battery into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard SP 500 and LG Battery Value Chain, you can compare the effects of market volatilities on Vanguard and LG Battery 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 Vanguard with a short position of LG Battery. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard and LG Battery.
Diversification Opportunities for Vanguard and LG Battery
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Vanguard and BATT is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard SP 500 and LG Battery Value Chain in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LG Battery Value and Vanguard 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 Vanguard SP 500 are associated (or correlated) with LG Battery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LG Battery Value has no effect on the direction of Vanguard i.e., Vanguard and LG Battery go up and down completely randomly.
Pair Corralation between Vanguard and LG Battery
Assuming the 90 days trading horizon Vanguard SP 500 is expected to generate 0.72 times more return on investment than LG Battery. However, Vanguard SP 500 is 1.39 times less risky than LG Battery. It trades about 0.13 of its potential returns per unit of risk. LG Battery Value Chain is currently generating about 0.02 per unit of risk. If you would invest 7,559 in Vanguard SP 500 on September 2, 2024 and sell it today you would earn a total of 2,549 from holding Vanguard SP 500 or generate 33.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard SP 500 vs. LG Battery Value Chain
Performance |
| Timeline |
| Vanguard SP 500 |
| LG Battery Value |
Vanguard and LG Battery Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard and LG Battery
The main advantage of trading using opposite Vanguard and LG Battery positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard position performs unexpectedly, LG Battery 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 Battery will offset losses from the drop in LG Battery's long position.| Vanguard vs. Vanguard FTSE Emerging | Vanguard vs. Vanguard USD Emerging | Vanguard vs. Vanguard FTSE Developed | Vanguard vs. Vanguard FTSE Japan |
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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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