Correlation Between Total Soft and LG Household
Can any of the company-specific risk be diversified away by investing in both Total Soft 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 Total Soft and LG Household into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Total Soft Bank and LG Household Healthcare, you can compare the effects of market volatilities on Total Soft 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 Total Soft with a short position of LG Household. Check out your portfolio center. Please also check ongoing floating volatility patterns of Total Soft and LG Household.
Diversification Opportunities for Total Soft and LG Household
-0.2 | Correlation Coefficient |
Good diversification
The 3 months correlation between Total and 051905 is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Total Soft Bank 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 Total Soft 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 Total Soft Bank 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 Total Soft i.e., Total Soft and LG Household go up and down completely randomly.
Pair Corralation between Total Soft and LG Household
Assuming the 90 days trading horizon Total Soft Bank is expected to generate 1.86 times more return on investment than LG Household. However, Total Soft is 1.86 times more volatile than LG Household Healthcare. It trades about -0.01 of its potential returns per unit of risk. LG Household Healthcare is currently generating about -0.11 per unit of risk. If you would invest 540,000 in Total Soft Bank on September 3, 2024 and sell it today you would lose (72,000) from holding Total Soft Bank or give up 13.33% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Total Soft Bank vs. LG Household Healthcare
Performance |
| Timeline |
| Total Soft Bank |
| LG Household Healthcare |
Total Soft and LG Household Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Total Soft and LG Household
The main advantage of trading using opposite Total Soft and LG Household positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Total Soft 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.| Total Soft vs. Hanmi Semiconductor Co | Total Soft vs. Iljin Display | Total Soft vs. Dongbang Transport Logistics | Total Soft vs. Daol Investment Securities |
| LG Household vs. Total Soft Bank | LG Household vs. Korea Information Communications | LG Household vs. DB Insurance Co | LG Household vs. Mgame Corp |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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