Correlation Between LG Battery and UBS Barclays

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

By analyzing existing cross correlation between LG Battery Value Chain and UBS Barclays Liquid, you can compare the effects of market volatilities on LG Battery and UBS Barclays 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 Battery with a short position of UBS Barclays. Check out your portfolio center. Please also check ongoing floating volatility patterns of LG Battery and UBS Barclays.

Diversification Opportunities for LG Battery and UBS Barclays

0.65

Correlation Coefficient

LG Battery  UBS Barclays

Poor diversification

The 3 months correlation between BATE and UBS is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding LG Battery Value Chain and UBS Barclays Liquid in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UBS Barclays Liquid and LG Battery 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 Battery Value Chain are associated (or correlated) with UBS Barclays. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UBS Barclays Liquid has no effect on the direction of LG Battery i.e., LG Battery and UBS Barclays go up and down completely randomly.

Pair Corralation between LG Battery and UBS Barclays

Assuming the 90 days trading horizon LG Battery is expected to generate 5.32 times less return on investment than UBS Barclays. In addition to that, LG Battery is 2.58 times more volatile than UBS Barclays Liquid. It trades about 0.0 of its total potential returns per unit of risk. UBS Barclays Liquid is currently generating about 0.04 per unit of volatility. If you would invest  1,294  in UBS Barclays Liquid on October 24, 2024 and sell it today you would earn a total of  127.00  from holding UBS Barclays Liquid or generate 9.81% return on investment over 90 days.

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

LG Battery Value Chain  vs.  UBS Barclays Liquid

LG Battery Value

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in LG Battery Value Chain are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile technical and fundamental indicators, LG Battery may actually be approaching a critical reversion point that can send shares even higher in February 2025.

UBS Barclays Liquid

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in UBS Barclays Liquid are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, UBS Barclays is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with LG Battery and UBS Barclays

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

The idea behind LG Battery Value Chain and UBS Barclays Liquid 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 Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.