Correlation Between Union Materials and LG Household
Can any of the company-specific risk be diversified away by investing in both Union Materials 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 Union Materials and LG Household into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Union Materials Corp and LG Household Healthcare, you can compare the effects of market volatilities on Union Materials 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 Union Materials with a short position of LG Household. Check out your portfolio center. Please also check ongoing floating volatility patterns of Union Materials and LG Household.
Diversification Opportunities for Union Materials and LG Household
-0.4 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Union and 051900 is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Union Materials Corp 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 Union Materials 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 Union Materials Corp 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 Union Materials i.e., Union Materials and LG Household go up and down completely randomly.
Pair Corralation between Union Materials and LG Household
Assuming the 90 days trading horizon Union Materials Corp is expected to generate 1.35 times more return on investment than LG Household. However, Union Materials is 1.35 times more volatile than LG Household Healthcare. It trades about 0.03 of its potential returns per unit of risk. LG Household Healthcare is currently generating about -0.1 per unit of risk. If you would invest 237,000 in Union Materials Corp on September 1, 2024 and sell it today you would earn a total of 2,000 from holding Union Materials Corp or generate 0.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Union Materials Corp vs. LG Household Healthcare
Performance |
| Timeline |
| Union Materials Corp |
| LG Household Healthcare |
Union Materials and LG Household Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Union Materials and LG Household
The main advantage of trading using opposite Union Materials and LG Household positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Union Materials 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.| Union Materials vs. LG Display | Union Materials vs. Hyundai Motor | Union Materials vs. Hyundai Motor Co | Union Materials vs. Hyundai Motor Co |
| LG Household vs. Sungmoon Electronics Co | LG Household vs. Shinil Electronics Co | LG Household vs. LG Electronics | LG Household vs. Cuckoo Homesys 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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