Correlation Between LG Electronics and Benchmark Electronics

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

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

Diversification Opportunities for LG Electronics and Benchmark Electronics

0.41

Correlation Coefficient

LG Electronics  Benchmark Electronics

Very weak diversification

The 3 months correlation between LGLG and Benchmark is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding LG Electronics and Benchmark Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Benchmark Electronics 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 Benchmark Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Benchmark Electronics has no effect on the direction of LG Electronics i.e., LG Electronics and Benchmark Electronics go up and down completely randomly.

Pair Corralation between LG Electronics and Benchmark Electronics

Assuming the 90 days trading horizon LG Electronics is expected to generate 1.09 times less return on investment than Benchmark Electronics. In addition to that, LG Electronics is 1.49 times more volatile than Benchmark Electronics. It trades about 0.06 of its total potential returns per unit of risk. Benchmark Electronics is currently generating about 0.1 per unit of volatility. If you would invest  2,987  in Benchmark Electronics on April 20, 2025 and sell it today you would earn a total of  373.00  from holding Benchmark Electronics or generate 12.49% return on investment over 90 days.

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

LG Electronics  vs.  Benchmark Electronics

LG Electronics

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in LG Electronics are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, LG Electronics may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Benchmark Electronics

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Benchmark Electronics are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Benchmark Electronics reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with LG Electronics and Benchmark Electronics

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

The idea behind LG Electronics and Benchmark 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.

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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.