Correlation Between Casio Computer and LG Electronics

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

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

Diversification Opportunities for Casio Computer and LG Electronics

-0.61

Correlation Coefficient

Casio Computer  LG Electronics

Excellent diversification

The 3 months correlation between Casio and LGLG is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Casio Computer CoLtd and LG Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LG Electronics and Casio Computer 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 Casio Computer CoLtd 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 Casio Computer i.e., Casio Computer and LG Electronics go up and down completely randomly.

Pair Corralation between Casio Computer and LG Electronics

Assuming the 90 days trading horizon Casio Computer CoLtd is expected to under-perform the LG Electronics. But the stock apears to be less risky and, when comparing its historical volatility, Casio Computer CoLtd is 1.45 times less risky than LG Electronics. The stock trades about -0.02 of its potential returns per unit of risk. The LG Electronics is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  1,579  in LG Electronics on October 11, 2024 and sell it today you would lose (229.00) from holding LG Electronics or give up 14.5% of portfolio value over 90 days.

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

Casio Computer CoLtd  vs.  LG Electronics

Casio Computer CoLtd

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Casio Computer CoLtd are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, Casio Computer may actually be approaching a critical reversion point that can send shares even higher in February 2025.

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 latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Casio Computer and LG Electronics

The main advantage of trading using opposite Casio Computer and LG Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Casio Computer 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 Casio Computer CoLtd 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.