Correlation Between LG Household and Korea Industrial
Can any of the company-specific risk be diversified away by investing in both LG Household and Korea 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 Korea 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 Korea Industrial Co, you can compare the effects of market volatilities on LG Household and Korea 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 Korea Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of LG Household and Korea Industrial.
Diversification Opportunities for LG Household and Korea Industrial
0.34 | Correlation Coefficient |
Weak diversification
The 3 months correlation between 051900 and Korea is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding LG Household Healthcare and Korea Industrial Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Korea 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 Korea Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Korea Industrial has no effect on the direction of LG Household i.e., LG Household and Korea Industrial go up and down completely randomly.
Pair Corralation between LG Household and Korea Industrial
Assuming the 90 days trading horizon LG Household Healthcare is expected to under-perform the Korea Industrial. In addition to that, LG Household is 1.05 times more volatile than Korea Industrial Co. It trades about -0.07 of its total potential returns per unit of risk. Korea Industrial Co is currently generating about 0.08 per unit of volatility. If you would invest 271,000 in Korea Industrial Co on November 7, 2024 and sell it today you would earn a total of 4,000 from holding Korea Industrial Co or generate 1.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
LG Household Healthcare vs. Korea Industrial Co
Performance |
| Timeline |
| LG Household Healthcare |
| Korea Industrial |
LG Household and Korea Industrial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LG Household and Korea Industrial
The main advantage of trading using opposite LG Household and Korea Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LG Household position performs unexpectedly, Korea 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 Korea Industrial will offset losses from the drop in Korea Industrial's long position.| LG Household vs. Hyundai Motor | LG Household vs. Solution Advanced Technology | LG Household vs. Busan Industrial Co | LG Household vs. Busan Ind |
| Korea Industrial vs. Orbitech Co | Korea Industrial vs. Vina Technology Co | Korea Industrial vs. SS TECH | Korea Industrial vs. Playgram 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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