Correlation Between LG Electronics and GAMES OPERATORS

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

By analyzing existing cross correlation between LG Electronics and GAMES OPERATORS SA, you can compare the effects of market volatilities on LG Electronics and GAMES OPERATORS 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 Electronics with a short position of GAMES OPERATORS. Check out your portfolio center. Please also check ongoing floating volatility patterns of LG Electronics and GAMES OPERATORS.

Diversification Opportunities for LG Electronics and GAMES OPERATORS

-0.61

Correlation Coefficient

LG Electronics  GAMES OPERATORS

Excellent diversification

The 3 months correlation between LGLG and GAMES is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding LG Electronics and GAMES OPERATORS SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GAMES OPERATORS SA and LG Electronics 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 Electronics are associated (or correlated) with GAMES OPERATORS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GAMES OPERATORS SA has no effect on the direction of LG Electronics i.e., LG Electronics and GAMES OPERATORS go up and down completely randomly.

Pair Corralation between LG Electronics and GAMES OPERATORS

Assuming the 90 days trading horizon LG Electronics is expected to under-perform the GAMES OPERATORS. But the stock apears to be less risky and, when comparing its historical volatility, LG Electronics is 1.3 times less risky than GAMES OPERATORS. The stock trades about -0.09 of its potential returns per unit of risk. The GAMES OPERATORS SA is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  318.00  in GAMES OPERATORS SA on December 20, 2024 and sell it today you would earn a total of  82.00  from holding GAMES OPERATORS SA or generate 25.79% return on investment over 90 days.

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

LG Electronics  vs.  GAMES OPERATORS SA

LG Electronics

Risk-Adjusted Performance

Very Weak

Over the last 90 days LG Electronics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

GAMES OPERATORS SA

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in GAMES OPERATORS SA are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, GAMES OPERATORS reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with LG Electronics and GAMES OPERATORS

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

The idea behind LG Electronics and GAMES OPERATORS SA 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.