Correlation Between Seoul Semiconductor and LG Household
Can any of the company-specific risk be diversified away by investing in both Seoul Semiconductor 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 Seoul Semiconductor and LG Household into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Seoul Semiconductor Co and LG Household Healthcare, you can compare the effects of market volatilities on Seoul Semiconductor 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 Seoul Semiconductor with a short position of LG Household. Check out your portfolio center. Please also check ongoing floating volatility patterns of Seoul Semiconductor and LG Household.
Diversification Opportunities for Seoul Semiconductor and LG Household
-0.02 | Correlation Coefficient |
Good diversification
The 3 months correlation between Seoul and 051905 is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Seoul Semiconductor Co 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 Seoul Semiconductor 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 Seoul Semiconductor Co 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 Seoul Semiconductor i.e., Seoul Semiconductor and LG Household go up and down completely randomly.
Pair Corralation between Seoul Semiconductor and LG Household
Assuming the 90 days trading horizon Seoul Semiconductor Co is expected to generate 1.42 times more return on investment than LG Household. However, Seoul Semiconductor is 1.42 times more volatile than LG Household Healthcare. It trades about -0.12 of its potential returns per unit of risk. LG Household Healthcare is currently generating about -0.27 per unit of risk. If you would invest 746,000 in Seoul Semiconductor Co on November 7, 2024 and sell it today you would lose (28,000) from holding Seoul Semiconductor Co or give up 3.75% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 89.47% |
| Values | Daily Returns |
Seoul Semiconductor Co vs. LG Household Healthcare
Performance |
| Timeline |
| Seoul Semiconductor |
| LG Household Healthcare |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Seoul Semiconductor and LG Household Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Seoul Semiconductor and LG Household
The main advantage of trading using opposite Seoul Semiconductor and LG Household positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Seoul Semiconductor 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.The idea behind Seoul Semiconductor Co and LG Household Healthcare pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| LG Household vs. MediaZen | LG Household vs. Spolytech Co | LG Household vs. Yura Tech Co | LG Household vs. Ewon Comfortech 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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