Correlation Between Seoul Food and LG Electronics
Can any of the company-specific risk be diversified away by investing in both Seoul Food 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 Seoul Food and LG Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Seoul Food Industrial and LG Electronics, you can compare the effects of market volatilities on Seoul Food 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 Seoul Food with a short position of LG Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Seoul Food and LG Electronics.
Diversification Opportunities for Seoul Food and LG Electronics
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Seoul and 066570 is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Seoul Food Industrial and LG Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LG Electronics and Seoul Food 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 Seoul Food Industrial 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 has no effect on the direction of Seoul Food i.e., Seoul Food and LG Electronics go up and down completely randomly.
Pair Corralation between Seoul Food and LG Electronics
Assuming the 90 days trading horizon Seoul Food Industrial is expected to under-perform the LG Electronics. But the stock apears to be less risky and, when comparing its historical volatility, Seoul Food Industrial is 1.45 times less risky than LG Electronics. The stock trades about -0.05 of its potential returns per unit of risk. The LG Electronics is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 8,632,399 in LG Electronics on September 3, 2024 and sell it today you would earn a total of 337,601 from holding LG Electronics or generate 3.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Seoul Food Industrial vs. LG Electronics
Performance |
| Timeline |
| Seoul Food Industrial |
| LG Electronics |
Seoul Food and LG Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Seoul Food and LG Electronics
The main advantage of trading using opposite Seoul Food and LG Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Seoul Food 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.| Seoul Food vs. Neungyule Education | Seoul Food vs. Sangsin Energy Display | Seoul Food vs. FNC Entertainment Co | Seoul Food vs. SKONEC Entertainment Co |
| LG Electronics vs. Lindeman Asia Investment | LG Electronics vs. EBEST Investment Securities | LG Electronics vs. Sangsangin Investment Securities | LG Electronics vs. Shinhan Inverse Silver |
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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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