Correlation Between LG Household and Shinsegae
Can any of the company-specific risk be diversified away by investing in both LG Household and Shinsegae 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 Shinsegae 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 Shinsegae, you can compare the effects of market volatilities on LG Household and Shinsegae 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 Shinsegae. Check out your portfolio center. Please also check ongoing floating volatility patterns of LG Household and Shinsegae.
Diversification Opportunities for LG Household and Shinsegae
0.22 | Correlation Coefficient |
Modest diversification
The 3 months correlation between 051900 and Shinsegae is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding LG Household Healthcare and Shinsegae in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shinsegae 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 Shinsegae. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shinsegae has no effect on the direction of LG Household i.e., LG Household and Shinsegae go up and down completely randomly.
Pair Corralation between LG Household and Shinsegae
Assuming the 90 days trading horizon LG Household is expected to generate 2.08 times less return on investment than Shinsegae. In addition to that, LG Household is 1.24 times more volatile than Shinsegae. It trades about 0.11 of its total potential returns per unit of risk. Shinsegae is currently generating about 0.29 per unit of volatility. If you would invest 13,270,000 in Shinsegae on November 28, 2024 and sell it today you would earn a total of 1,310,000 from holding Shinsegae or generate 9.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 94.74% |
| Values | Daily Returns |
LG Household Healthcare vs. Shinsegae
Performance |
| Timeline |
| LG Household Healthcare |
| Shinsegae |
LG Household and Shinsegae Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LG Household and Shinsegae
The main advantage of trading using opposite LG Household and Shinsegae positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LG Household position performs unexpectedly, Shinsegae 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 Shinsegae will offset losses from the drop in Shinsegae's long position.| LG Household vs. Duksan Hi Metal | LG Household vs. Hana Financial | LG Household vs. Dongil Metal Co | LG Household vs. Kukil Metal Co |
| Shinsegae vs. Haesung Industrial Co | Shinsegae vs. Automobile Pc | Shinsegae vs. Lotte Data Communication | Shinsegae vs. Korea Industrial 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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