Correlation Between LG Electronics and RYANAIR HLDGS

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

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

Diversification Opportunities for LG Electronics and RYANAIR HLDGS

0.0

Correlation Coefficient

LG Electronics  RYANAIR HLDGS

Pay attention - limited upside

The 3 months correlation between LGLG and RYANAIR is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding LG Electronics and RYANAIR HLDGS ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RYANAIR HLDGS ADR 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 RYANAIR HLDGS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RYANAIR HLDGS ADR has no effect on the direction of LG Electronics i.e., LG Electronics and RYANAIR HLDGS go up and down completely randomly.

Pair Corralation between LG Electronics and RYANAIR HLDGS

Assuming the 90 days trading horizon LG Electronics is expected to under-perform the RYANAIR HLDGS. But the stock apears to be less risky and, when comparing its historical volatility, LG Electronics is 4.3 times less risky than RYANAIR HLDGS. The stock trades about 0.0 of its potential returns per unit of risk. The RYANAIR HLDGS ADR is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  3,731  in RYANAIR HLDGS ADR on October 8, 2024 and sell it today you would earn a total of  349.00  from holding RYANAIR HLDGS ADR or generate 9.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

LG Electronics  vs.  RYANAIR HLDGS ADR

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 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.

RYANAIR HLDGS ADR

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in RYANAIR HLDGS ADR are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, RYANAIR HLDGS may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with LG Electronics and RYANAIR HLDGS

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

The idea behind LG Electronics and RYANAIR HLDGS ADR 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.