Correlation Between LG Cyber and IShares Core

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

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

Diversification Opportunities for LG Cyber and IShares Core

0.64

Correlation Coefficient

LG Cyber  IShares Core

Poor diversification

The 3 months correlation between ISPY and IShares is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding LG Cyber Security and iShares Core DAX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Core DAX and LG Cyber 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 Cyber Security are associated (or correlated) with IShares Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Core DAX has no effect on the direction of LG Cyber i.e., LG Cyber and IShares Core go up and down completely randomly.

Pair Corralation between LG Cyber and IShares Core

Assuming the 90 days trading horizon LG Cyber Security is expected to generate 1.54 times more return on investment than IShares Core. However, LG Cyber is 1.54 times more volatile than iShares Core DAX. It trades about 0.07 of its potential returns per unit of risk. iShares Core DAX is currently generating about 0.07 per unit of risk. If you would invest  1,597  in LG Cyber Security on October 9, 2024 and sell it today you would earn a total of  1,030  from holding LG Cyber Security or generate 64.5% return on investment over 90 days.

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

LG Cyber Security  vs.  iShares Core DAX

LG Cyber Security

Risk-Adjusted Performance

0 of 100

Solid

Over the last 90 days LG Cyber Security has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly weak basic indicators, LG Cyber showed solid returns over the last few months and may actually be approaching a breakup point.

iShares Core DAX

Risk-Adjusted Performance

0 of 100

Insignificant

Over the last 90 days iShares Core DAX has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Pair Trading with LG Cyber and IShares Core

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

The idea behind LG Cyber Security and iShares Core DAX 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..