Correlation Between Asia Technology and LG Household
Can any of the company-specific risk be diversified away by investing in both Asia Technology 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 Asia Technology and LG Household into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Asia Technology Co and LG Household Healthcare, you can compare the effects of market volatilities on Asia Technology 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 Asia Technology with a short position of LG Household. Check out your portfolio center. Please also check ongoing floating volatility patterns of Asia Technology and LG Household.
Diversification Opportunities for Asia Technology and LG Household
-0.48 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Asia and 051905 is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Asia Technology 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 Asia Technology 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 Asia Technology 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 Asia Technology i.e., Asia Technology and LG Household go up and down completely randomly.
Pair Corralation between Asia Technology and LG Household
Assuming the 90 days trading horizon Asia Technology Co is expected to generate 1.24 times more return on investment than LG Household. However, Asia Technology is 1.24 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 -0.07 per unit of risk. If you would invest 220,000 in Asia Technology Co on August 28, 2024 and sell it today you would earn a total of 0.00 from holding Asia Technology Co or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Asia Technology Co vs. LG Household Healthcare
Performance |
| Timeline |
| Asia Technology |
| LG Household Healthcare |
Asia Technology and LG Household Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Asia Technology and LG Household
The main advantage of trading using opposite Asia Technology and LG Household positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Asia Technology 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.| Asia Technology vs. Lotte Data Communication | Asia Technology vs. Eugene Technology CoLtd | Asia Technology vs. Daishin Information Communications | Asia Technology vs. Guyoung Technology Co |
| LG Household vs. Jeil Steel Mfg | LG Household vs. Dongbu Steel Co | LG Household vs. Cuckoo Homesys Co | LG Household vs. Daejung Chemicals Metals |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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