Correlation Between Korea Industrial and LG Household
Can any of the company-specific risk be diversified away by investing in both Korea Industrial and LG Household 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 Korea Industrial and LG Household into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Korea Industrial Co and LG Household Healthcare, you can compare the effects of market volatilities on Korea Industrial and LG Household 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 Korea Industrial with a short position of LG Household. Check out your portfolio center. Please also check ongoing floating volatility patterns of Korea Industrial and LG Household.
Diversification Opportunities for Korea Industrial and LG Household
-0.06 | Correlation Coefficient |
Good diversification
The 3 months correlation between Korea and 051905 is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Korea Industrial Co and LG Household Healthcare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LG Household Healthcare and Korea Industrial 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 Korea Industrial Co are associated (or correlated) with LG Household. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LG Household Healthcare has no effect on the direction of Korea Industrial i.e., Korea Industrial and LG Household go up and down completely randomly.
Pair Corralation between Korea Industrial and LG Household
Assuming the 90 days trading horizon Korea Industrial Co is expected to generate 1.82 times more return on investment than LG Household. However, Korea Industrial is 1.82 times more volatile than LG Household Healthcare. It trades about 0.01 of its potential returns per unit of risk. LG Household Healthcare is currently generating about -0.02 per unit of risk. If you would invest 323,532 in Korea Industrial Co on November 9, 2024 and sell it today you would lose (27,532) from holding Korea Industrial Co or give up 8.51% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Korea Industrial Co vs. LG Household Healthcare
Performance |
| Timeline |
| Korea Industrial |
| LG Household Healthcare |
Korea Industrial and LG Household Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Korea Industrial and LG Household
The main advantage of trading using opposite Korea Industrial and LG Household positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Korea Industrial position performs unexpectedly, LG Household 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 Household will offset losses from the drop in LG Household's long position.| Korea Industrial vs. TJ media Co | Korea Industrial vs. NH Investment Securities | Korea Industrial vs. Barunson Entertainment Arts | Korea Industrial vs. SKONEC Entertainment Co |
| LG Household vs. DC Media Co | LG Household vs. TJ media Co | LG Household vs. T3 Entertainment Co | LG Household vs. Heungkuk Metaltech CoLtd |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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