Correlation Between IShares Core and LG Cyber

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

By analyzing existing cross correlation between iShares Core SP and LG Cyber Security, you can compare the effects of market volatilities on IShares Core and LG Cyber 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 IShares Core with a short position of LG Cyber. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Core and LG Cyber.

Diversification Opportunities for IShares Core and LG Cyber

0.75

Correlation Coefficient

IShares Core  LG Cyber

Poor diversification

The 3 months correlation between IShares and ISPY is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core SP and LG Cyber Security in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LG Cyber Security and IShares Core 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 iShares Core SP are associated (or correlated) with LG Cyber. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LG Cyber Security has no effect on the direction of IShares Core i.e., IShares Core and LG Cyber go up and down completely randomly.

Pair Corralation between IShares Core and LG Cyber

Assuming the 90 days trading horizon IShares Core is expected to generate 1.8 times less return on investment than LG Cyber. But when comparing it to its historical volatility, iShares Core SP is 1.09 times less risky than LG Cyber. It trades about 0.15 of its potential returns per unit of risk. LG Cyber Security is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  2,584  in LG Cyber Security on October 26, 2024 and sell it today you would earn a total of  112.00  from holding LG Cyber Security or generate 4.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	94.44%
Values	Daily Returns

iShares Core SP  vs.  LG Cyber Security

iShares Core SP

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Core SP are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, IShares Core is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

LG Cyber Security

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in LG Cyber Security are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, LG Cyber showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IShares Core and LG Cyber

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

The idea behind iShares Core SP and LG Cyber Security 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.