Correlation Between IShares Govt and LG Battery

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

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

Diversification Opportunities for IShares Govt and LG Battery

-0.24

Correlation Coefficient

IShares Govt  LG Battery

Very good diversification

The 3 months correlation between IShares and BATE is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding iShares Govt Bond 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 IShares Govt 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 Govt Bond 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 IShares Govt i.e., IShares Govt and LG Battery go up and down completely randomly.

Pair Corralation between IShares Govt and LG Battery

Assuming the 90 days trading horizon iShares Govt Bond is expected to under-perform the LG Battery. But the etf apears to be less risky and, when comparing its historical volatility, iShares Govt Bond is 3.09 times less risky than LG Battery. The etf trades about -0.06 of its potential returns per unit of risk. The LG Battery Value Chain is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  1,549  in LG Battery Value Chain on October 24, 2024 and sell it today you would earn a total of  130.00  from holding LG Battery Value Chain or generate 8.39% return on investment over 90 days.

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

iShares Govt Bond  vs.  LG Battery Value Chain

iShares Govt Bond

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Govt Bond has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, IShares Govt is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

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.

Pair Trading with IShares Govt and LG Battery

The main advantage of trading using opposite IShares Govt and LG Battery positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Govt 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 iShares Govt Bond 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.

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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.