Correlation Between Zhongsheng Group and LG Electronics

Can any of the company-specific risk be diversified away by investing in both Zhongsheng 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 Zhongsheng 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 Zhongsheng Group Holdings and LG Electronics, you can compare the effects of market volatilities on Zhongsheng 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 Zhongsheng Group with a short position of LG Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zhongsheng Group and LG Electronics.

Diversification Opportunities for Zhongsheng Group and LG Electronics

-0.51

Correlation Coefficient

Zhongsheng Group  LG Electronics

Excellent diversification

The 3 months correlation between Zhongsheng and LGLG is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Zhongsheng Group Holdings and LG Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LG Electronics and Zhongsheng 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 Zhongsheng Group Holdings 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 Zhongsheng Group i.e., Zhongsheng Group and LG Electronics go up and down completely randomly.

Pair Corralation between Zhongsheng Group and LG Electronics

Assuming the 90 days horizon Zhongsheng Group Holdings is expected to generate 2.15 times more return on investment than LG Electronics. However, Zhongsheng Group is 2.15 times more volatile than LG Electronics. It trades about 0.06 of its potential returns per unit of risk. LG Electronics is currently generating about -0.08 per unit of risk. If you would invest  145.00  in Zhongsheng Group Holdings on October 9, 2024 and sell it today you would earn a total of  19.00  from holding Zhongsheng Group Holdings or generate 13.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.33%
Values	Daily Returns

Zhongsheng Group Holdings  vs.  LG Electronics

Zhongsheng Group Holdings

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Zhongsheng Group Holdings are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Zhongsheng Group reported solid returns over the last few months and may actually be approaching a breakup point.

LG Electronics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LG Electronics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Zhongsheng Group and LG Electronics

The main advantage of trading using opposite Zhongsheng Group and LG Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Zhongsheng 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 Zhongsheng Group Holdings 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.