Correlation Between LG Household and Daelim Industrial
Can any of the company-specific risk be diversified away by investing in both LG Household and Daelim Industrial 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 LG Household and Daelim Industrial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LG Household Healthcare and Daelim Industrial Co, you can compare the effects of market volatilities on LG Household and Daelim Industrial 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 LG Household with a short position of Daelim Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of LG Household and Daelim Industrial.
Diversification Opportunities for LG Household and Daelim Industrial
0.46 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between 051900 and Daelim is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding LG Household Healthcare and Daelim Industrial Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daelim Industrial and LG Household 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 LG Household Healthcare are associated (or correlated) with Daelim Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daelim Industrial has no effect on the direction of LG Household i.e., LG Household and Daelim Industrial go up and down completely randomly.
Pair Corralation between LG Household and Daelim Industrial
Assuming the 90 days trading horizon LG Household Healthcare is expected to generate 1.63 times more return on investment than Daelim Industrial. However, LG Household is 1.63 times more volatile than Daelim Industrial Co. It trades about -0.13 of its potential returns per unit of risk. Daelim Industrial Co is currently generating about -0.34 per unit of risk. If you would invest 35,000,000 in LG Household Healthcare on August 30, 2024 and sell it today you would lose (2,950,000) from holding LG Household Healthcare or give up 8.43% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
LG Household Healthcare vs. Daelim Industrial Co
Performance |
| Timeline |
| LG Household Healthcare |
| Daelim Industrial |
LG Household and Daelim Industrial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LG Household and Daelim Industrial
The main advantage of trading using opposite LG Household and Daelim Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LG Household position performs unexpectedly, Daelim Industrial 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 Daelim Industrial will offset losses from the drop in Daelim Industrial's long position.| LG Household vs. Samsung Electronics Co | LG Household vs. Samsung Electronics Co | LG Household vs. Hyundai Motor Co | LG Household vs. Hyundai Motor |
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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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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