Correlation Between Dupont De and LG Battery

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

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

Diversification Opportunities for Dupont De and LG Battery

-0.3

Correlation Coefficient

Dupont De  LG Battery

Very good diversification

The 3 months correlation between Dupont and BATE is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Dupont De Nemours and LG Battery Value Chain in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LG Battery Value and Dupont De 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 Dupont De Nemours are associated (or correlated) with LG Battery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LG Battery Value has no effect on the direction of Dupont De i.e., Dupont De and LG Battery go up and down completely randomly.

Pair Corralation between Dupont De and LG Battery

Allowing for the 90-day total investment horizon Dupont De Nemours is expected to under-perform the LG Battery. But the stock apears to be less risky and, when comparing its historical volatility, Dupont De Nemours is 1.01 times less risky than LG Battery. The stock trades about -0.15 of its potential returns per unit of risk. The LG Battery Value Chain is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  1,576  in LG Battery Value Chain on October 8, 2024 and sell it today you would earn a total of  83.00  from holding LG Battery Value Chain or generate 5.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.77%
Values	Daily Returns

Dupont De Nemours  vs.  LG Battery Value Chain

Dupont De Nemours

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dupont De Nemours has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

LG Battery Value

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in LG Battery Value Chain are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, LG Battery is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Dupont De and LG Battery

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

The idea behind Dupont De Nemours and LG Battery Value Chain 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.