Correlation Between LG Innotek and Daewoo Engineering
Can any of the company-specific risk be diversified away by investing in both LG Innotek and Daewoo Engineering 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 LG Innotek and Daewoo Engineering into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LG Innotek Co and Daewoo Engineering Construction, you can compare the effects of market volatilities on LG Innotek and Daewoo Engineering 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 LG Innotek with a short position of Daewoo Engineering. Check out your portfolio center. Please also check ongoing floating volatility patterns of LG Innotek and Daewoo Engineering.
Diversification Opportunities for LG Innotek and Daewoo Engineering
0.34 | Correlation Coefficient |
Weak diversification
The 3 months correlation between 011070 and Daewoo is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding LG Innotek Co and Daewoo Engineering Constructio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daewoo Engineering and LG Innotek 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 LG Innotek Co are associated (or correlated) with Daewoo Engineering. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daewoo Engineering has no effect on the direction of LG Innotek i.e., LG Innotek and Daewoo Engineering go up and down completely randomly.
Pair Corralation between LG Innotek and Daewoo Engineering
Assuming the 90 days trading horizon LG Innotek Co is expected to generate 0.95 times more return on investment than Daewoo Engineering. However, LG Innotek Co is 1.06 times less risky than Daewoo Engineering. It trades about 0.25 of its potential returns per unit of risk. Daewoo Engineering Construction is currently generating about 0.16 per unit of risk. If you would invest 14,870,000 in LG Innotek Co on November 27, 2024 and sell it today you would earn a total of 1,530,000 from holding LG Innotek Co or generate 10.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
LG Innotek Co vs. Daewoo Engineering Constructio
Performance |
| Timeline |
| LG Innotek |
| Daewoo Engineering |
LG Innotek and Daewoo Engineering Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LG Innotek and Daewoo Engineering
The main advantage of trading using opposite LG Innotek and Daewoo Engineering positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LG Innotek position performs unexpectedly, Daewoo Engineering 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 Daewoo Engineering will offset losses from the drop in Daewoo Engineering's long position.| LG Innotek vs. Samick Musical Instruments | LG Innotek vs. AeroSpace Technology of | LG Innotek vs. BGF Retail Co | LG Innotek vs. Genie Music |
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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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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