Correlation Between LG Energy and Ewon Comfortech

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

Diversification Opportunities for LG Energy and Ewon Comfortech

-0.53

Correlation Coefficient

LG Energy  Ewon Comfortech

Excellent diversification

The 3 months correlation between 373220 and Ewon is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding LG Energy Solution and Ewon Comfortech Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ewon Comfortech 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 Ewon Comfortech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ewon Comfortech has no effect on the direction of LG Energy i.e., LG Energy and Ewon Comfortech go up and down completely randomly.

Pair Corralation between LG Energy and Ewon Comfortech

Assuming the 90 days trading horizon LG Energy Solution is expected to under-perform the Ewon Comfortech. But the stock apears to be less risky and, when comparing its historical volatility, LG Energy Solution is 1.55 times less risky than Ewon Comfortech. The stock trades about -0.01 of its potential returns per unit of risk. The Ewon Comfortech Co is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  104,000  in Ewon Comfortech Co on December 25, 2024 and sell it today you would earn a total of  13,200  from holding Ewon Comfortech Co or generate 12.69% return on investment over 90 days.

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

LG Energy Solution  vs.  Ewon Comfortech 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.

Ewon Comfortech

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Ewon Comfortech Co are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Ewon Comfortech sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with LG Energy and Ewon Comfortech

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

The idea behind LG Energy Solution and Ewon Comfortech 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.