Correlation Between Korea Shipbuilding and LG Electronics
Can any of the company-specific risk be diversified away by investing in both Korea Shipbuilding 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 Korea Shipbuilding and LG Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Korea Shipbuilding Offshore and LG Electronics, you can compare the effects of market volatilities on Korea Shipbuilding 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 Korea Shipbuilding with a short position of LG Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Korea Shipbuilding and LG Electronics.
Diversification Opportunities for Korea Shipbuilding and LG Electronics
-0.18 | Correlation Coefficient |
Good diversification
The 3 months correlation between Korea and 066570 is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Korea Shipbuilding Offshore and LG Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LG Electronics and Korea Shipbuilding 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 Shipbuilding Offshore 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 Korea Shipbuilding i.e., Korea Shipbuilding and LG Electronics go up and down completely randomly.
Pair Corralation between Korea Shipbuilding and LG Electronics
Assuming the 90 days trading horizon Korea Shipbuilding Offshore is expected to generate 1.49 times more return on investment than LG Electronics. However, Korea Shipbuilding is 1.49 times more volatile than LG Electronics. It trades about 0.15 of its potential returns per unit of risk. LG Electronics is currently generating about -0.03 per unit of risk. If you would invest 13,040,000 in Korea Shipbuilding Offshore on August 29, 2024 and sell it today you would earn a total of 8,560,000 from holding Korea Shipbuilding Offshore or generate 65.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Korea Shipbuilding Offshore vs. LG Electronics
Performance |
| Timeline |
| Korea Shipbuilding |
| LG Electronics |
Korea Shipbuilding and LG Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Korea Shipbuilding and LG Electronics
The main advantage of trading using opposite Korea Shipbuilding and LG Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Korea Shipbuilding 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.| Korea Shipbuilding vs. Samsung Electronics Co | Korea Shipbuilding vs. Samsung Electronics Co | Korea Shipbuilding vs. Hyundai Motor Co | Korea Shipbuilding vs. Hyundai Motor |
| LG Electronics vs. Foodnamoo | LG Electronics vs. Samsung Life Insurance | LG Electronics vs. Shinhan Financial Group | LG Electronics vs. SCI Information Service |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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