Correlation Between Lotte Fine and LG Household
Can any of the company-specific risk be diversified away by investing in both Lotte Fine 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 Lotte Fine and LG Household into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lotte Fine Chemical and LG Household Healthcare, you can compare the effects of market volatilities on Lotte Fine 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 Lotte Fine with a short position of LG Household. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lotte Fine and LG Household.
Diversification Opportunities for Lotte Fine and LG Household
-0.25 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Lotte and 051900 is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Lotte Fine Chemical 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 Lotte Fine 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 Lotte Fine Chemical 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 Lotte Fine i.e., Lotte Fine and LG Household go up and down completely randomly.
Pair Corralation between Lotte Fine and LG Household
Assuming the 90 days trading horizon Lotte Fine is expected to generate 1.03 times less return on investment than LG Household. But when comparing it to its historical volatility, Lotte Fine Chemical is 1.24 times less risky than LG Household. It trades about 0.13 of its potential returns per unit of risk. LG Household Healthcare is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 30,700,000 in LG Household Healthcare on November 30, 2024 and sell it today you would earn a total of 1,350,000 from holding LG Household Healthcare or generate 4.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lotte Fine Chemical vs. LG Household Healthcare
Performance |
| Timeline |
| Lotte Fine Chemical |
| LG Household Healthcare |
Lotte Fine and LG Household Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lotte Fine and LG Household
The main advantage of trading using opposite Lotte Fine and LG Household positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lotte Fine 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.| Lotte Fine vs. Playgram Co | ||
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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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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