Correlation Between LG Energy and Doosan Engine

Can any of the company-specific risk be diversified away by investing in both LG Energy and Doosan Engine 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 Doosan Engine 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 Doosan Engine Co, you can compare the effects of market volatilities on LG Energy and Doosan Engine 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 Doosan Engine. Check out your portfolio center. Please also check ongoing floating volatility patterns of LG Energy and Doosan Engine.

Diversification Opportunities for LG Energy and Doosan Engine

0.0

Correlation Coefficient

LG Energy  Doosan Engine

Pay attention - limited upside

The 3 months correlation between 373220 and Doosan is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding LG Energy Solution and Doosan Engine Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Doosan Engine 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 Doosan Engine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Doosan Engine has no effect on the direction of LG Energy i.e., LG Energy and Doosan Engine go up and down completely randomly.

Pair Corralation between LG Energy and Doosan Engine

If you would invest  35,900,000  in LG Energy Solution on October 23, 2024 and sell it today you would earn a total of  1,150,000  from holding LG Energy Solution or generate 3.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

LG Energy Solution  vs.  Doosan Engine Co

LG Energy Solution

Risk-Adjusted Performance

0 of 100

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.

Doosan Engine

Risk-Adjusted Performance

0 of 100

Good

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

Pair Trading with LG Energy and Doosan Engine

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

The idea behind LG Energy Solution and Doosan Engine 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.

Check out your portfolio center.

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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.