Correlation Between Korea Real and LG Uplus
Can any of the company-specific risk be diversified away by investing in both Korea Real and LG Uplus 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 Uplus 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 Uplus, you can compare the effects of market volatilities on Korea Real and LG Uplus 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 Uplus. Check out your portfolio center. Please also check ongoing floating volatility patterns of Korea Real and LG Uplus.
Diversification Opportunities for Korea Real and LG Uplus
-0.33 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Korea and 032640 is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Korea Real Estate and LG Uplus in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LG Uplus 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 Uplus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LG Uplus has no effect on the direction of Korea Real i.e., Korea Real and LG Uplus go up and down completely randomly.
Pair Corralation between Korea Real and LG Uplus
Assuming the 90 days trading horizon Korea Real Estate is expected to under-perform the LG Uplus. But the stock apears to be less risky and, when comparing its historical volatility, Korea Real Estate is 1.7 times less risky than LG Uplus. The stock trades about -0.11 of its potential returns per unit of risk. The LG Uplus is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 983,000 in LG Uplus on October 17, 2024 and sell it today you would earn a total of 55,000 from holding LG Uplus or generate 5.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Korea Real Estate vs. LG Uplus
Performance |
| Timeline |
| Korea Real Estate |
| LG Uplus |
Korea Real and LG Uplus Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Korea Real and LG Uplus
The main advantage of trading using opposite Korea Real and LG Uplus positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Korea Real position performs unexpectedly, LG Uplus 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 Uplus will offset losses from the drop in LG Uplus' long position.| Korea Real vs. Cube Entertainment | Korea Real vs. SAMG Entertainment Co | Korea Real vs. FOODWELL Co | Korea Real vs. Seoul Food Industrial |
| LG Uplus vs. Xavis Co | LG Uplus vs. Hurum Co | LG Uplus vs. Daishin Balance No8 | LG Uplus vs. Korea Real Estate |
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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