Correlation Between LG Household and DB Financial
Can any of the company-specific risk be diversified away by investing in both LG Household and DB Financial 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 DB Financial 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 DB Financial Investment, you can compare the effects of market volatilities on LG Household and DB Financial 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 DB Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of LG Household and DB Financial.
Diversification Opportunities for LG Household and DB Financial
0.35 | Correlation Coefficient |
Weak diversification
The 3 months correlation between 051900 and 016610 is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding LG Household Healthcare and DB Financial Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DB Financial Investment 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 DB Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DB Financial Investment has no effect on the direction of LG Household i.e., LG Household and DB Financial go up and down completely randomly.
Pair Corralation between LG Household and DB Financial
Assuming the 90 days trading horizon LG Household is expected to generate 5.14 times less return on investment than DB Financial. In addition to that, LG Household is 1.12 times more volatile than DB Financial Investment. It trades about 0.02 of its total potential returns per unit of risk. DB Financial Investment is currently generating about 0.09 per unit of volatility. If you would invest 370,961 in DB Financial Investment on September 4, 2024 and sell it today you would earn a total of 184,039 from holding DB Financial Investment or generate 49.61% 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. DB Financial Investment
Performance |
| Timeline |
| LG Household Healthcare |
| DB Financial Investment |
LG Household and DB Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LG Household and DB Financial
The main advantage of trading using opposite LG Household and DB Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LG Household position performs unexpectedly, DB Financial 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 DB Financial will offset losses from the drop in DB Financial's long position.| LG Household vs. LG Display | LG Household vs. Hyundai Motor | LG Household vs. Hyundai Motor Co | LG Household vs. Hyundai Motor Co |
| DB Financial vs. LG Household Healthcare | DB Financial vs. Samwha Electronics Co | DB Financial vs. Sunny Electronics Corp | DB Financial vs. Cuckoo Electronics 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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