Correlation Between LG Household and Automobile
Can any of the company-specific risk be diversified away by investing in both LG Household and Automobile 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 Automobile 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 Automobile Pc, you can compare the effects of market volatilities on LG Household and Automobile 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 Automobile. Check out your portfolio center. Please also check ongoing floating volatility patterns of LG Household and Automobile.
Diversification Opportunities for LG Household and Automobile
0.19 | Correlation Coefficient |
Average diversification
The 3 months correlation between 051900 and Automobile is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding LG Household Healthcare and Automobile Pc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Automobile Pc 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 Automobile. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Automobile Pc has no effect on the direction of LG Household i.e., LG Household and Automobile go up and down completely randomly.
Pair Corralation between LG Household and Automobile
Assuming the 90 days trading horizon LG Household Healthcare is expected to under-perform the Automobile. But the stock apears to be less risky and, when comparing its historical volatility, LG Household Healthcare is 1.54 times less risky than Automobile. The stock trades about -0.11 of its potential returns per unit of risk. The Automobile Pc is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 68,000 in Automobile Pc on August 29, 2024 and sell it today you would earn a total of 1,000.00 from holding Automobile Pc or generate 1.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
LG Household Healthcare vs. Automobile Pc
Performance |
| Timeline |
| LG Household Healthcare |
| Automobile Pc |
LG Household and Automobile Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LG Household and Automobile
The main advantage of trading using opposite LG Household and Automobile positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LG Household position performs unexpectedly, Automobile 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 Automobile will offset losses from the drop in Automobile'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 |
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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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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