Correlation Between Moonbae Steel and LG Household
Can any of the company-specific risk be diversified away by investing in both Moonbae Steel 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 Moonbae Steel and LG Household into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Moonbae Steel and LG Household Healthcare, you can compare the effects of market volatilities on Moonbae Steel 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 Moonbae Steel with a short position of LG Household. Check out your portfolio center. Please also check ongoing floating volatility patterns of Moonbae Steel and LG Household.
Diversification Opportunities for Moonbae Steel and LG Household
0.28 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Moonbae and 051905 is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Moonbae Steel 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 Moonbae Steel 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 Moonbae Steel 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 Moonbae Steel i.e., Moonbae Steel and LG Household go up and down completely randomly.
Pair Corralation between Moonbae Steel and LG Household
Assuming the 90 days trading horizon Moonbae Steel is expected to generate 0.83 times more return on investment than LG Household. However, Moonbae Steel is 1.21 times less risky than LG Household. It trades about -0.02 of its potential returns per unit of risk. LG Household Healthcare is currently generating about -0.06 per unit of risk. If you would invest 332,478 in Moonbae Steel on August 29, 2024 and sell it today you would lose (75,478) from holding Moonbae Steel or give up 22.7% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Moonbae Steel vs. LG Household Healthcare
Performance |
| Timeline |
| Moonbae Steel |
| LG Household Healthcare |
Moonbae Steel and LG Household Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Moonbae Steel and LG Household
The main advantage of trading using opposite Moonbae Steel and LG Household positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Moonbae Steel 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.| Moonbae Steel vs. LG Chemicals | Moonbae Steel vs. Lotte Chemical Corp | Moonbae Steel vs. Hyundai Steel | Moonbae Steel vs. Seah Steel Corp |
| LG Household vs. Seoyon Topmetal Co | LG Household vs. Kukil Metal Co | LG Household vs. Sangsin Energy Display | LG Household vs. Digital Power Communications |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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