Correlation Between DataSolution and LG Energy

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

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

Diversification Opportunities for DataSolution and LG Energy

0.21

Correlation Coefficient

DataSolution  LG Energy

Modest diversification

The 3 months correlation between DataSolution and 373220 is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding DataSolution and LG Energy Solution in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LG Energy Solution and DataSolution 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 DataSolution are associated (or correlated) with LG Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LG Energy Solution has no effect on the direction of DataSolution i.e., DataSolution and LG Energy go up and down completely randomly.

Pair Corralation between DataSolution and LG Energy

Assuming the 90 days trading horizon DataSolution is expected to generate 1.07 times more return on investment than LG Energy. However, DataSolution is 1.07 times more volatile than LG Energy Solution. It trades about 0.02 of its potential returns per unit of risk. LG Energy Solution is currently generating about -0.01 per unit of risk. If you would invest  434,500  in DataSolution on December 26, 2024 and sell it today you would earn a total of  6,500  from holding DataSolution or generate 1.5% return on investment over 90 days.

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

DataSolution  vs.  LG Energy Solution

DataSolution

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in DataSolution are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, DataSolution is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

LG Energy Solution

Risk-Adjusted Performance

Very Weak

Over the last 90 days LG Energy Solution has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, LG Energy is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with DataSolution and LG Energy

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

The idea behind DataSolution and LG Energy Solution 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.