Correlation Between KTB Investment and LG Household
Can any of the company-specific risk be diversified away by investing in both KTB Investment 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 KTB Investment and LG Household into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between KTB Investment Securities and LG Household Healthcare, you can compare the effects of market volatilities on KTB Investment 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 KTB Investment with a short position of LG Household. Check out your portfolio center. Please also check ongoing floating volatility patterns of KTB Investment and LG Household.
Diversification Opportunities for KTB Investment and LG Household
-0.26 | Correlation Coefficient |
Very good diversification
The 3 months correlation between KTB and 051900 is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding KTB Investment Securities 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 KTB Investment 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 KTB Investment Securities 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 KTB Investment i.e., KTB Investment and LG Household go up and down completely randomly.
Pair Corralation between KTB Investment and LG Household
Assuming the 90 days trading horizon KTB Investment Securities is expected to generate 3.75 times more return on investment than LG Household. However, KTB Investment is 3.75 times more volatile than LG Household Healthcare. It trades about 0.15 of its potential returns per unit of risk. LG Household Healthcare is currently generating about -0.43 per unit of risk. If you would invest 260,000 in KTB Investment Securities on October 17, 2024 and sell it today you would earn a total of 35,000 from holding KTB Investment Securities or generate 13.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
KTB Investment Securities vs. LG Household Healthcare
Performance |
| Timeline |
| KTB Investment Securities |
| LG Household Healthcare |
KTB Investment and LG Household Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with KTB Investment and LG Household
The main advantage of trading using opposite KTB Investment and LG Household positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KTB Investment 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.| KTB Investment vs. Hanjin Transportation Co | KTB Investment vs. Jeil Steel Mfg | KTB Investment vs. Korea Steel Co | KTB Investment vs. Nice Information Telecommunication |
| LG Household vs. Sungdo Engineering Construction | LG Household vs. KTB Investment Securities | LG Household vs. Woori Technology Investment | LG Household vs. E Investment Development |
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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