Correlation Between Korea Real and LG Innotek
Can any of the company-specific risk be diversified away by investing in both Korea Real and LG Innotek 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 Real and LG Innotek into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Korea Real Estate and LG Innotek Co, you can compare the effects of market volatilities on Korea Real and LG Innotek 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 Real with a short position of LG Innotek. Check out your portfolio center. Please also check ongoing floating volatility patterns of Korea Real and LG Innotek.
Diversification Opportunities for Korea Real and LG Innotek
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Korea and 011070 is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Korea Real Estate and LG Innotek Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LG Innotek and Korea Real 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 Real Estate are associated (or correlated) with LG Innotek. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LG Innotek has no effect on the direction of Korea Real i.e., Korea Real and LG Innotek go up and down completely randomly.
Pair Corralation between Korea Real and LG Innotek
Assuming the 90 days trading horizon Korea Real Estate is expected to generate 0.33 times more return on investment than LG Innotek. However, Korea Real Estate is 3.02 times less risky than LG Innotek. It trades about -0.12 of its potential returns per unit of risk. LG Innotek Co is currently generating about -0.21 per unit of risk. If you would invest 110,400 in Korea Real Estate on November 2, 2024 and sell it today you would lose (10,600) from holding Korea Real Estate or give up 9.6% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Korea Real Estate vs. LG Innotek Co
Performance |
| Timeline |
| Korea Real Estate |
| LG Innotek |
Korea Real and LG Innotek Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Korea Real and LG Innotek
The main advantage of trading using opposite Korea Real and LG Innotek positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Korea Real position performs unexpectedly, LG Innotek 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 Innotek will offset losses from the drop in LG Innotek's long position.| Korea Real vs. Lotte Data Communication | Korea Real vs. Kukil Metal Co | Korea Real vs. SK Chemicals Co | Korea Real vs. NICE Information Service |
| LG Innotek vs. Samsung Electronics Co | LG Innotek vs. Samsung Electronics Co | LG Innotek vs. SK Hynix | LG Innotek vs. HMM Co |
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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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