Correlation Between LG Electronics and Bridgestone
Can any of the company-specific risk be diversified away by investing in both LG Electronics and Bridgestone 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 Bridgestone into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LG Electronics and Bridgestone, you can compare the effects of market volatilities on LG Electronics and Bridgestone 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 Bridgestone. Check out your portfolio center. Please also check ongoing floating volatility patterns of LG Electronics and Bridgestone.
Diversification Opportunities for LG Electronics and Bridgestone
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between LGLG and Bridgestone is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding LG Electronics and Bridgestone in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bridgestone 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 Bridgestone. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bridgestone has no effect on the direction of LG Electronics i.e., LG Electronics and Bridgestone go up and down completely randomly.
Pair Corralation between LG Electronics and Bridgestone
Assuming the 90 days trading horizon LG Electronics is expected to generate 2.16 times more return on investment than Bridgestone. However, LG Electronics is 2.16 times more volatile than Bridgestone. It trades about 0.0 of its potential returns per unit of risk. Bridgestone is currently generating about 0.0 per unit of risk. If you would invest 1,520 in LG Electronics on September 23, 2024 and sell it today you would lose (210.00) from holding LG Electronics or give up 13.82% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
LG Electronics vs. Bridgestone
Performance |
Timeline |
LG Electronics |
Bridgestone |
LG Electronics and Bridgestone Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with LG Electronics and Bridgestone
The main advantage of trading using opposite LG Electronics and Bridgestone positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LG Electronics position performs unexpectedly, Bridgestone 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 Bridgestone will offset losses from the drop in Bridgestone's long position.LG Electronics vs. Sumitomo Rubber Industries | LG Electronics vs. INTER CARS SA | LG Electronics vs. Cars Inc | LG Electronics vs. Summit Materials |
Bridgestone vs. Advanced Drainage Systems | Bridgestone vs. The Goodyear Tire | Bridgestone vs. Sumitomo Rubber Industries | Bridgestone vs. Zeon Corporation |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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