Correlation Between FATFISH GROUP and LG Electronics

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

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

Diversification Opportunities for FATFISH GROUP and LG Electronics

0.14

Correlation Coefficient

FATFISH GROUP  LG Electronics

Average diversification

The 3 months correlation between FATFISH and LGLG is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding FATFISH GROUP LTD and LG Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LG Electronics and FATFISH GROUP 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 FATFISH GROUP LTD are associated (or correlated) with LG Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LG Electronics has no effect on the direction of FATFISH GROUP i.e., FATFISH GROUP and LG Electronics go up and down completely randomly.

Pair Corralation between FATFISH GROUP and LG Electronics

Assuming the 90 days horizon FATFISH GROUP LTD is expected to generate 8.07 times more return on investment than LG Electronics. However, FATFISH GROUP is 8.07 times more volatile than LG Electronics. It trades about 0.11 of its potential returns per unit of risk. LG Electronics is currently generating about -0.07 per unit of risk. If you would invest  0.40  in FATFISH GROUP LTD on December 22, 2024 and sell it today you would earn a total of  0.20  from holding FATFISH GROUP LTD or generate 50.0% return on investment over 90 days.

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

FATFISH GROUP LTD  vs.  LG Electronics

FATFISH GROUP LTD

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in FATFISH GROUP LTD are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, FATFISH GROUP reported solid returns over the last few months and may actually be approaching a breakup point.

LG Electronics

Risk-Adjusted Performance

Very Weak

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

Pair Trading with FATFISH GROUP and LG Electronics

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

The idea behind FATFISH GROUP LTD and LG Electronics 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.