Correlation Between LG Gerd and IShares Govt

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

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

Diversification Opportunities for LG Gerd and IShares Govt

0.6

Correlation Coefficient

LG Gerd  IShares Govt

Poor diversification

The 3 months correlation between GERD and IShares is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding LG Gerd Kommer and iShares Govt Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Govt Bond and LG Gerd 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 Gerd Kommer are associated (or correlated) with IShares Govt. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Govt Bond has no effect on the direction of LG Gerd i.e., LG Gerd and IShares Govt go up and down completely randomly.

Pair Corralation between LG Gerd and IShares Govt

Assuming the 90 days trading horizon LG Gerd Kommer is expected to generate 2.05 times more return on investment than IShares Govt. However, LG Gerd is 2.05 times more volatile than iShares Govt Bond. It trades about 0.08 of its potential returns per unit of risk. iShares Govt Bond is currently generating about 0.05 per unit of risk. If you would invest  1,156  in LG Gerd Kommer on September 23, 2024 and sell it today you would earn a total of  30.00  from holding LG Gerd Kommer or generate 2.6% return on investment over 90 days.

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

LG Gerd Kommer  vs.  iShares Govt Bond

LG Gerd Kommer

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in LG Gerd Kommer are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, LG Gerd is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

iShares Govt Bond

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Govt Bond are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, IShares Govt 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 Gerd and IShares Govt

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

The idea behind LG Gerd Kommer and iShares Govt Bond 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.