Correlation Between IShares Core and LG Battery

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

By analyzing existing cross correlation between iShares Core SP and LG Battery Value Chain, you can compare the effects of market volatilities on IShares Core and LG Battery 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 IShares Core with a short position of LG Battery. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Core and LG Battery.

Diversification Opportunities for IShares Core and LG Battery

0.62

Correlation Coefficient

IShares Core  LG Battery

Poor diversification

The 3 months correlation between IShares and BATE is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core SP and LG Battery Value Chain in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LG Battery Value and IShares Core 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 iShares Core SP are associated (or correlated) with LG Battery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LG Battery Value has no effect on the direction of IShares Core i.e., IShares Core and LG Battery go up and down completely randomly.

Pair Corralation between IShares Core and LG Battery

Assuming the 90 days trading horizon iShares Core SP is expected to generate 0.66 times more return on investment than LG Battery. However, iShares Core SP is 1.52 times less risky than LG Battery. It trades about 0.14 of its potential returns per unit of risk. LG Battery Value Chain is currently generating about 0.05 per unit of risk. If you would invest  45,837  in iShares Core SP on October 10, 2024 and sell it today you would earn a total of  14,927  from holding iShares Core SP or generate 32.57% return on investment over 90 days.

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

iShares Core SP  vs.  LG Battery Value Chain

iShares Core SP

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Core SP are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, IShares Core may actually be approaching a critical reversion point that can send shares even higher in February 2025.

LG Battery Value

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in LG Battery Value Chain are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile technical and fundamental indicators, LG Battery may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with IShares Core and LG Battery

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

The idea behind iShares Core SP and LG Battery Value Chain 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.