Correlation Between Delta Electronics and LG Electronics

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

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

Diversification Opportunities for Delta Electronics and LG Electronics

-0.76

Correlation Coefficient

Delta Electronics  LG Electronics

Pay attention - limited upside

The 3 months correlation between Delta and LGLG is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Delta Electronics Public and LG Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LG Electronics and Delta 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 Delta Electronics Public are associated (or correlated) with LG Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LG Electronics has no effect on the direction of Delta Electronics i.e., Delta Electronics and LG Electronics go up and down completely randomly.

Pair Corralation between Delta Electronics and LG Electronics

Assuming the 90 days trading horizon Delta Electronics Public is expected to under-perform the LG Electronics. In addition to that, Delta Electronics is 1.06 times more volatile than LG Electronics. It trades about -0.14 of its total potential returns per unit of risk. LG Electronics is currently generating about 0.12 per unit of volatility. If you would invest  1,290  in LG Electronics on October 10, 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 Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Delta Electronics Public  vs.  LG Electronics

Delta Electronics Public

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Delta Electronics Public are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Delta Electronics reported solid returns over the last few months and may actually be approaching a breakup point.

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 fragile 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.

Pair Trading with Delta Electronics and LG Electronics

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

The idea behind Delta Electronics Public and LG Electronics 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.