Correlation Between LG Electronics and Federal Home
Can any of the company-specific risk be diversified away by investing in both LG Electronics and Federal Home 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 LG Electronics and Federal Home into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LG Electronics and Federal Home Loan, you can compare the effects of market volatilities on LG Electronics and Federal Home 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 LG Electronics with a short position of Federal Home. Check out your portfolio center. Please also check ongoing floating volatility patterns of LG Electronics and Federal Home.
Diversification Opportunities for LG Electronics and Federal Home
-0.38 | Correlation Coefficient |
Very good diversification
The 3 months correlation between LGLG and Federal is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding LG Electronics and Federal Home Loan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federal Home Loan and LG Electronics 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 LG Electronics are associated (or correlated) with Federal Home. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federal Home Loan has no effect on the direction of LG Electronics i.e., LG Electronics and Federal Home go up and down completely randomly.
Pair Corralation between LG Electronics and Federal Home
Assuming the 90 days trading horizon LG Electronics is expected to generate 0.32 times more return on investment than Federal Home. However, LG Electronics is 3.08 times less risky than Federal Home. It trades about -0.01 of its potential returns per unit of risk. Federal Home Loan is currently generating about -0.01 per unit of risk. If you would invest 1,410 in LG Electronics on February 3, 2024 and sell it today you would lose (10.00) from holding LG Electronics or give up 0.71% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
LG Electronics vs. Federal Home Loan
Performance |
Timeline |
LG Electronics |
Federal Home Loan |
LG Electronics and Federal Home Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with LG Electronics and Federal Home
The main advantage of trading using opposite LG Electronics and Federal Home positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LG Electronics position performs unexpectedly, Federal Home 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 Federal Home will offset losses from the drop in Federal Home's long position.LG Electronics vs. Apple Inc | LG Electronics vs. Apple Inc | LG Electronics vs. Apple Inc | LG Electronics vs. Apple Inc |
Federal Home vs. Ally Financial | Federal Home vs. Walker Dunlop | Federal Home vs. Hercules Capital | Federal Home vs. DIVERSIFIED ROYALTY |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
Other Complementary Tools
Options Analysis Analyze and evaluate options and option chains as a potential hedge for your portfolios | |
Global Markets Map Get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes | |
FinTech Suite Use AI to screen and filter profitable investment opportunities | |
Money Managers Screen money managers from public funds and ETFs managed around the world | |
Equity Valuation Check real value of public entities based on technical and fundamental data | |
Idea Breakdown Analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes |