Correlation Between IShares SP and LG Clean

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

By analyzing existing cross correlation between iShares SP 500 and LG Clean Water, you can compare the effects of market volatilities on IShares SP and LG Clean 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 SP with a short position of LG Clean. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares SP and LG Clean.

Diversification Opportunities for IShares SP and LG Clean

0.69

Correlation Coefficient

IShares SP  LG Clean

Poor diversification

The 3 months correlation between IShares and GLUG is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding iShares SP 500 and LG Clean Water in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LG Clean Water and IShares SP 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 SP 500 are associated (or correlated) with LG Clean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LG Clean Water has no effect on the direction of IShares SP i.e., IShares SP and LG Clean go up and down completely randomly.

Pair Corralation between IShares SP and LG Clean

Assuming the 90 days trading horizon iShares SP 500 is expected to under-perform the LG Clean. In addition to that, IShares SP is 1.48 times more volatile than LG Clean Water. It trades about -0.07 of its total potential returns per unit of risk. LG Clean Water is currently generating about 0.0 per unit of volatility. If you would invest  1,585  in LG Clean Water on December 30, 2024 and sell it today you would lose (3.00) from holding LG Clean Water or give up 0.19% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.41%
Values	Daily Returns

iShares SP 500  vs.  LG Clean Water

iShares SP 500

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares SP 500 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, IShares SP is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

LG Clean Water

Risk-Adjusted Performance

Very Weak

Over the last 90 days LG Clean Water has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, LG Clean 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 SP and LG Clean

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

The idea behind iShares SP 500 and LG Clean Water 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.