Correlation Between LG Household and Seoul Food
Can any of the company-specific risk be diversified away by investing in both LG Household and Seoul Food 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 Seoul Food 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 Seoul Food Industrial, you can compare the effects of market volatilities on LG Household and Seoul Food 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 Seoul Food. Check out your portfolio center. Please also check ongoing floating volatility patterns of LG Household and Seoul Food.
Diversification Opportunities for LG Household and Seoul Food
0.49 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between 051900 and Seoul is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding LG Household Healthcare and Seoul Food Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Seoul Food 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 Seoul Food. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Seoul Food Industrial has no effect on the direction of LG Household i.e., LG Household and Seoul Food go up and down completely randomly.
Pair Corralation between LG Household and Seoul Food
Assuming the 90 days trading horizon LG Household Healthcare is expected to under-perform the Seoul Food. In addition to that, LG Household is 1.83 times more volatile than Seoul Food Industrial. It trades about -0.13 of its total potential returns per unit of risk. Seoul Food Industrial is currently generating about -0.01 per unit of volatility. If you would invest 15,600 in Seoul Food Industrial on August 30, 2024 and sell it today you would lose (100.00) from holding Seoul Food Industrial or give up 0.64% 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. Seoul Food Industrial
Performance |
| Timeline |
| LG Household Healthcare |
| Seoul Food Industrial |
LG Household and Seoul Food Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LG Household and Seoul Food
The main advantage of trading using opposite LG Household and Seoul Food positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LG Household position performs unexpectedly, Seoul Food 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 Seoul Food will offset losses from the drop in Seoul Food'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 |
| Seoul Food vs. Osang Healthcare Co,Ltd | Seoul Food vs. Coloray International Investment | Seoul Food vs. Lotte Non Life Insurance | Seoul Food vs. Hanwha InvestmentSecurities 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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