Correlation Between IShares Corp and LG Battery

Can any of the company-specific risk be diversified away by investing in both IShares Corp 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 Corp 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 Corp Bond and LG Battery Value Chain, you can compare the effects of market volatilities on IShares Corp 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 Corp with a short position of LG Battery. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Corp and LG Battery.

Diversification Opportunities for IShares Corp and LG Battery

0.55

Correlation Coefficient

IShares Corp  LG Battery

Very weak diversification

The 3 months correlation between IShares and BATT is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding iShares Corp 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 Corp 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 Corp 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 Corp i.e., IShares Corp and LG Battery go up and down completely randomly.

Pair Corralation between IShares Corp and LG Battery

Assuming the 90 days trading horizon iShares Corp Bond is expected to under-perform the LG Battery. But the etf apears to be less risky and, when comparing its historical volatility, iShares Corp Bond is 11.8 times less risky than LG Battery. The etf trades about -0.09 of its potential returns per unit of risk. The LG Battery Value Chain is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  1,500  in LG Battery Value Chain on October 9, 2024 and sell it today you would earn a total of  50.00  from holding LG Battery Value Chain or generate 3.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	93.75%
Values	Daily Returns

iShares Corp Bond  vs.  LG Battery Value Chain

iShares Corp Bond

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days iShares Corp Bond has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, IShares Corp is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

LG Battery Value

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in LG Battery Value Chain are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, LG Battery is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with IShares Corp and LG Battery

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

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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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.