Correlation Between Korea Real and LG Household
Can any of the company-specific risk be diversified away by investing in both Korea Real 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 Korea Real and LG Household 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 Household Healthcare, you can compare the effects of market volatilities on Korea Real 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 Korea Real with a short position of LG Household. Check out your portfolio center. Please also check ongoing floating volatility patterns of Korea Real and LG Household.
Diversification Opportunities for Korea Real and LG Household
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Korea and 051900 is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Korea Real Estate 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 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 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 Korea Real i.e., Korea Real and LG Household go up and down completely randomly.
Pair Corralation between Korea Real and LG Household
Assuming the 90 days trading horizon Korea Real Estate is expected to generate 0.39 times more return on investment than LG Household. However, Korea Real Estate is 2.54 times less risky than LG Household. It trades about -0.03 of its potential returns per unit of risk. LG Household Healthcare is currently generating about -0.05 per unit of risk. If you would invest 124,230 in Korea Real Estate on September 2, 2024 and sell it today you would lose (21,830) from holding Korea Real Estate or give up 17.57% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Korea Real Estate vs. LG Household Healthcare
Performance |
| Timeline |
| Korea Real Estate |
| LG Household Healthcare |
Korea Real and LG Household Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Korea Real and LG Household
The main advantage of trading using opposite Korea Real and LG Household positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Korea Real 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.| Korea Real vs. Samsung Electronics Co | Korea Real vs. Samsung Electronics Co | Korea Real vs. LG Energy Solution | Korea Real vs. SK Hynix |
| LG Household vs. Korea Real Estate | LG Household vs. Korea Ratings Co | LG Household vs. IQuest Co | LG Household vs. Wonbang Tech 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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