Correlation Between LG Uplus and TSI

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

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

Diversification Opportunities for LG Uplus and TSI

0.45

Correlation Coefficient

LG Uplus  TSI

Very weak diversification

The 3 months correlation between 032640 and TSI is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding LG Uplus and TSI Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TSI Co 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 TSI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TSI Co has no effect on the direction of LG Uplus i.e., LG Uplus and TSI go up and down completely randomly.

Pair Corralation between LG Uplus and TSI

Assuming the 90 days trading horizon LG Uplus is expected to generate 6.48 times less return on investment than TSI. But when comparing it to its historical volatility, LG Uplus is 4.58 times less risky than TSI. It trades about 0.07 of its potential returns per unit of risk. TSI Co is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  503,000  in TSI Co on December 28, 2024 and sell it today you would earn a total of  112,000  from holding TSI Co or generate 22.27% return on investment over 90 days.

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

LG Uplus  vs.  TSI Co

LG Uplus

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in LG Uplus are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, LG Uplus is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

TSI Co

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in TSI Co are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, TSI sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with LG Uplus and TSI

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

The idea behind LG Uplus and TSI 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.