Correlation Between LG Uplus and Genolution

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

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

Diversification Opportunities for LG Uplus and Genolution

-0.8

Correlation Coefficient

LG Uplus  Genolution

Pay attention - limited upside

The 3 months correlation between 032640 and Genolution is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding LG Uplus and Genolution in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Genolution and LG Uplus 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 Uplus are associated (or correlated) with Genolution. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Genolution has no effect on the direction of LG Uplus i.e., LG Uplus and Genolution go up and down completely randomly.

Pair Corralation between LG Uplus and Genolution

Assuming the 90 days trading horizon LG Uplus is expected to under-perform the Genolution. But the stock apears to be less risky and, when comparing its historical volatility, LG Uplus is 1.68 times less risky than Genolution. The stock trades about -0.06 of its potential returns per unit of risk. The Genolution is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  230,500  in Genolution on September 24, 2024 and sell it today you would lose (3,500) from holding Genolution or give up 1.52% of portfolio value over 90 days.

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

LG Uplus  vs.  Genolution

LG Uplus

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in LG Uplus are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, LG Uplus may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Genolution

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Genolution has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with LG Uplus and Genolution

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

The idea behind LG Uplus and Genolution 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.