Correlation Between GaeaSoft Corp and LG Household
Can any of the company-specific risk be diversified away by investing in both GaeaSoft Corp 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 GaeaSoft Corp and LG Household into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GaeaSoft Corp and LG Household Healthcare, you can compare the effects of market volatilities on GaeaSoft Corp 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 GaeaSoft Corp with a short position of LG Household. Check out your portfolio center. Please also check ongoing floating volatility patterns of GaeaSoft Corp and LG Household.
Diversification Opportunities for GaeaSoft Corp and LG Household
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between GaeaSoft and 051900 is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding GaeaSoft 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 GaeaSoft Corp 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 GaeaSoft 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 GaeaSoft Corp i.e., GaeaSoft Corp and LG Household go up and down completely randomly.
Pair Corralation between GaeaSoft Corp and LG Household
Assuming the 90 days trading horizon GaeaSoft Corp is expected to under-perform the LG Household. But the stock apears to be less risky and, when comparing its historical volatility, GaeaSoft Corp is 1.48 times less risky than LG Household. The stock trades about -0.29 of its potential returns per unit of risk. The LG Household Healthcare is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest 33,800,000 in LG Household Healthcare on September 4, 2024 and sell it today you would lose (1,050,000) from holding LG Household Healthcare or give up 3.11% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
GaeaSoft Corp vs. LG Household Healthcare
Performance |
| Timeline |
| GaeaSoft Corp |
| LG Household Healthcare |
GaeaSoft Corp and LG Household Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GaeaSoft Corp and LG Household
The main advantage of trading using opposite GaeaSoft Corp and LG Household positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GaeaSoft Corp 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.| GaeaSoft Corp vs. LG Household Healthcare | GaeaSoft Corp vs. Innowireless Co | GaeaSoft Corp vs. Hwangkum Steel Technology | GaeaSoft Corp vs. Eagle Veterinary Technology |
| LG Household vs. LG Display | LG Household vs. Hyundai Motor | LG Household vs. Hyundai Motor Co | LG Household vs. Hyundai Motor 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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