Correlation Between LG Household and Hannong Chemicals
Can any of the company-specific risk be diversified away by investing in both LG Household and Hannong Chemicals 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 Hannong Chemicals 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 Hannong Chemicals, you can compare the effects of market volatilities on LG Household and Hannong Chemicals 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 Hannong Chemicals. Check out your portfolio center. Please also check ongoing floating volatility patterns of LG Household and Hannong Chemicals.
Diversification Opportunities for LG Household and Hannong Chemicals
0.58 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between 051900 and Hannong is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding LG Household Healthcare and Hannong Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hannong Chemicals 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 Hannong Chemicals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hannong Chemicals has no effect on the direction of LG Household i.e., LG Household and Hannong Chemicals go up and down completely randomly.
Pair Corralation between LG Household and Hannong Chemicals
Assuming the 90 days trading horizon LG Household is expected to generate 11.32 times less return on investment than Hannong Chemicals. But when comparing it to its historical volatility, LG Household Healthcare is 2.1 times less risky than Hannong Chemicals. It trades about 0.01 of its potential returns per unit of risk. Hannong Chemicals is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 1,114,311 in Hannong Chemicals on August 25, 2024 and sell it today you would earn a total of 375,689 from holding Hannong Chemicals or generate 33.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
LG Household Healthcare vs. Hannong Chemicals
Performance |
| Timeline |
| LG Household Healthcare |
| Hannong Chemicals |
LG Household and Hannong Chemicals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LG Household and Hannong Chemicals
The main advantage of trading using opposite LG Household and Hannong Chemicals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LG Household position performs unexpectedly, Hannong Chemicals 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 Hannong Chemicals will offset losses from the drop in Hannong Chemicals' long position.| LG Household vs. AptaBio Therapeutics | LG Household vs. Daewoo SBI SPAC | LG Household vs. Dream Security co | LG Household vs. Microfriend |
| Hannong Chemicals vs. AptaBio Therapeutics | Hannong Chemicals vs. Daewoo SBI SPAC | Hannong Chemicals vs. Dream Security co | Hannong Chemicals vs. Microfriend |
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 CEOs Directory module to screen CEOs from public companies around the world.
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