Correlation Between Titan Company and LG Electronics

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

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

Diversification Opportunities for Titan Company and LG Electronics

0.75

Correlation Coefficient

Titan Company  LG Electronics

Poor diversification

The 3 months correlation between Titan and 066575 is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Titan Company Limited and LG Electronics Pfd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LG Electronics Pfd and Titan Company 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 Titan Company Limited 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 Pfd has no effect on the direction of Titan Company i.e., Titan Company and LG Electronics go up and down completely randomly.

Pair Corralation between Titan Company and LG Electronics

Assuming the 90 days trading horizon Titan Company Limited is expected to generate 0.75 times more return on investment than LG Electronics. However, Titan Company Limited is 1.34 times less risky than LG Electronics. It trades about -0.12 of its potential returns per unit of risk. LG Electronics Pfd is currently generating about -0.1 per unit of risk. If you would invest  362,115  in Titan Company Limited on September 3, 2024 and sell it today you would lose (37,215) from holding Titan Company Limited or give up 10.28% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.16%
Values	Daily Returns

Titan Company Limited  vs.  LG Electronics Pfd

Titan Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Titan Company Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

LG Electronics Pfd

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LG Electronics Pfd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Titan Company and LG Electronics

The main advantage of trading using opposite Titan Company and LG Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Titan Company 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 Titan Company Limited and LG Electronics Pfd 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.