Correlation Between Dongnam Chemical and LG Household
Can any of the company-specific risk be diversified away by investing in both Dongnam Chemical 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 Dongnam Chemical and LG Household into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dongnam Chemical Co and LG Household Healthcare, you can compare the effects of market volatilities on Dongnam Chemical 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 Dongnam Chemical with a short position of LG Household. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dongnam Chemical and LG Household.
Diversification Opportunities for Dongnam Chemical and LG Household
0.33 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Dongnam and 051900 is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Dongnam Chemical Co 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 Dongnam Chemical 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 Dongnam Chemical Co 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 Dongnam Chemical i.e., Dongnam Chemical and LG Household go up and down completely randomly.
Pair Corralation between Dongnam Chemical and LG Household
Assuming the 90 days trading horizon Dongnam Chemical Co is expected to generate 1.5 times more return on investment than LG Household. However, Dongnam Chemical is 1.5 times more volatile than LG Household Healthcare. It trades about 0.39 of its potential returns per unit of risk. LG Household Healthcare is currently generating about -0.28 per unit of risk. If you would invest 2,943,208 in Dongnam Chemical Co on October 11, 2024 and sell it today you would earn a total of 471,792 from holding Dongnam Chemical Co or generate 16.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.0% |
| Values | Daily Returns |
Dongnam Chemical Co vs. LG Household Healthcare
Performance |
| Timeline |
| Dongnam Chemical |
| LG Household Healthcare |
Dongnam Chemical and LG Household Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dongnam Chemical and LG Household
The main advantage of trading using opposite Dongnam Chemical and LG Household positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dongnam Chemical 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.| Dongnam Chemical vs. KG Eco Technology | Dongnam Chemical vs. Sung Bo Chemicals | Dongnam Chemical vs. SK Chemicals Co | Dongnam Chemical vs. ENF Technology Co |
| LG Household vs. Dongbang Ship Machinery | LG Household vs. ENERGYMACHINERY KOREA CoLtd | LG Household vs. Sungdo Engineering Construction | LG Household vs. Wireless Power Amplifier |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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