Correlation Between LG Corp and UNISEM

Can any of the company-specific risk be diversified away by investing in both LG Corp and UNISEM 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 Corp and UNISEM into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between LG Corp and UNISEM Co, you can compare the effects of market volatilities on LG Corp and UNISEM 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 Corp with a short position of UNISEM. Check out your portfolio center. Please also check ongoing floating volatility patterns of LG Corp and UNISEM.

Diversification Opportunities for LG Corp and UNISEM

-0.69

Correlation Coefficient

LG Corp  UNISEM

Excellent diversification

The 3 months correlation between 003550 and UNISEM is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding LG Corp and UNISEM Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UNISEM and LG Corp 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 Corp are associated (or correlated) with UNISEM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UNISEM has no effect on the direction of LG Corp i.e., LG Corp and UNISEM go up and down completely randomly.

Pair Corralation between LG Corp and UNISEM

Assuming the 90 days trading horizon LG Corp is expected to under-perform the UNISEM. But the stock apears to be less risky and, when comparing its historical volatility, LG Corp is 1.71 times less risky than UNISEM. The stock trades about -0.1 of its potential returns per unit of risk. The UNISEM Co is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  597,699  in UNISEM Co on November 28, 2024 and sell it today you would earn a total of  112,301  from holding UNISEM Co or generate 18.79% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

LG Corp  vs.  UNISEM Co

LG Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days LG Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

UNISEM

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in UNISEM Co are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, UNISEM sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with LG Corp and UNISEM

The main advantage of trading using opposite LG Corp and UNISEM positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LG Corp position performs unexpectedly, UNISEM 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 UNISEM will offset losses from the drop in UNISEM's long position.

The idea behind LG Corp and UNISEM Co pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.