Correlation Between LG Energy and Okins Electronics

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

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

Diversification Opportunities for LG Energy and Okins Electronics

-0.25

Correlation Coefficient

LG Energy  Okins Electronics

Very good diversification

The 3 months correlation between 373220 and Okins is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding LG Energy Solution and Okins Electronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Okins Electronics and LG Energy 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 Energy Solution are associated (or correlated) with Okins Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Okins Electronics has no effect on the direction of LG Energy i.e., LG Energy and Okins Electronics go up and down completely randomly.

Pair Corralation between LG Energy and Okins Electronics

Assuming the 90 days trading horizon LG Energy Solution is expected to under-perform the Okins Electronics. But the stock apears to be less risky and, when comparing its historical volatility, LG Energy Solution is 2.26 times less risky than Okins Electronics. The stock trades about -0.01 of its potential returns per unit of risk. The Okins Electronics Co is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  438,500  in Okins Electronics Co on December 26, 2024 and sell it today you would earn a total of  136,500  from holding Okins Electronics Co or generate 31.13% return on investment over 90 days.

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

LG Energy Solution  vs.  Okins Electronics Co

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.

Okins Electronics

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Okins Electronics Co are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Okins Electronics sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with LG Energy and Okins Electronics

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

The idea behind LG Energy Solution and Okins Electronics 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.