Correlation Between LG Household and DB HiTek
Can any of the company-specific risk be diversified away by investing in both LG Household and DB HiTek 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 DB HiTek 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 DB HiTek Co, you can compare the effects of market volatilities on LG Household and DB HiTek 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 DB HiTek. Check out your portfolio center. Please also check ongoing floating volatility patterns of LG Household and DB HiTek.
Diversification Opportunities for LG Household and DB HiTek
0.27 | Correlation Coefficient |
Modest diversification
The 3 months correlation between 051900 and 000990 is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding LG Household Healthcare and DB HiTek Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DB HiTek 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 DB HiTek. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DB HiTek has no effect on the direction of LG Household i.e., LG Household and DB HiTek go up and down completely randomly.
Pair Corralation between LG Household and DB HiTek
Assuming the 90 days trading horizon LG Household Healthcare is expected to under-perform the DB HiTek. But the stock apears to be less risky and, when comparing its historical volatility, LG Household Healthcare is 2.2 times less risky than DB HiTek. The stock trades about -0.18 of its potential returns per unit of risk. The DB HiTek Co is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest 3,395,000 in DB HiTek Co on October 25, 2024 and sell it today you would lose (40,000) from holding DB HiTek Co or give up 1.18% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.0% |
| Values | Daily Returns |
LG Household Healthcare vs. DB HiTek Co
Performance |
| Timeline |
| LG Household Healthcare |
| DB HiTek |
LG Household and DB HiTek Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LG Household and DB HiTek
The main advantage of trading using opposite LG Household and DB HiTek positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LG Household position performs unexpectedly, DB HiTek 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 DB HiTek will offset losses from the drop in DB HiTek's long position.| LG Household vs. Industrial Bank | LG Household vs. Pureun Mutual Savings | LG Household vs. Dongbang Transport Logistics | LG Household vs. Hotel Shilla Co |
| DB HiTek vs. Samyang Foods Co | DB HiTek vs. Digital Imaging Technology | DB HiTek vs. Daelim Trading Co | DB HiTek vs. DB Financial Investment |
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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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