Correlation Between LG Electronics and BANK CIMB

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

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

Diversification Opportunities for LG Electronics and BANK CIMB

0.54

Correlation Coefficient

LG Electronics  BANK CIMB

Very weak diversification

The 3 months correlation between LGLG and BANK is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding LG Electronics and BANK CIMB NIAGA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BANK CIMB NIAGA 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 BANK CIMB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BANK CIMB NIAGA has no effect on the direction of LG Electronics i.e., LG Electronics and BANK CIMB go up and down completely randomly.

Pair Corralation between LG Electronics and BANK CIMB

Assuming the 90 days trading horizon LG Electronics is expected to generate 1.72 times more return on investment than BANK CIMB. However, LG Electronics is 1.72 times more volatile than BANK CIMB NIAGA. It trades about 0.12 of its potential returns per unit of risk. BANK CIMB NIAGA is currently generating about -0.15 per unit of risk. If you would invest  1,290  in LG Electronics on October 9, 2024 and sell it today you would earn a total of  80.00  from holding LG Electronics or generate 6.2% return on investment over 90 days.

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

LG Electronics  vs.  BANK CIMB NIAGA

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.

BANK CIMB NIAGA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BANK CIMB NIAGA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, BANK CIMB is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with LG Electronics and BANK CIMB

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

The idea behind LG Electronics and BANK CIMB NIAGA 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.