Correlation Between LG Electronics and Citic Telecom

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

By analyzing existing cross correlation between LG Electronics and Citic Telecom International, you can compare the effects of market volatilities on LG Electronics and Citic Telecom 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 Citic Telecom. Check out your portfolio center. Please also check ongoing floating volatility patterns of LG Electronics and Citic Telecom.

Diversification Opportunities for LG Electronics and Citic Telecom

-0.62

Correlation Coefficient

LG Electronics  Citic Telecom

Excellent diversification

The 3 months correlation between LGLG and Citic is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding LG Electronics and Citic Telecom International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citic Telecom Intern 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 Citic Telecom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Citic Telecom Intern has no effect on the direction of LG Electronics i.e., LG Electronics and Citic Telecom go up and down completely randomly.

Pair Corralation between LG Electronics and Citic Telecom

Assuming the 90 days trading horizon LG Electronics is expected to under-perform the Citic Telecom. But the stock apears to be less risky and, when comparing its historical volatility, LG Electronics is 3.46 times less risky than Citic Telecom. The stock trades about -0.01 of its potential returns per unit of risk. The Citic Telecom International is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  4.04  in Citic Telecom International on October 13, 2024 and sell it today you would earn a total of  22.96  from holding Citic Telecom International or generate 568.32% return on investment over 90 days.

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

LG Electronics  vs.  Citic Telecom International

LG Electronics

Risk-Adjusted Performance

0 of 100

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 fragile performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Citic Telecom Intern

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Citic Telecom International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Citic Telecom 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 Electronics and Citic Telecom

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

The idea behind LG Electronics and Citic Telecom International 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.