Correlation Between LG Household and Industrial Bank
Can any of the company-specific risk be diversified away by investing in both LG Household and Industrial Bank 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 Industrial Bank 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 Industrial Bank, you can compare the effects of market volatilities on LG Household and Industrial Bank 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 Industrial Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of LG Household and Industrial Bank.
Diversification Opportunities for LG Household and Industrial Bank
-0.28 | Correlation Coefficient |
Very good diversification
The 3 months correlation between 051900 and Industrial is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding LG Household Healthcare and Industrial Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Industrial Bank 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 Industrial Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Industrial Bank has no effect on the direction of LG Household i.e., LG Household and Industrial Bank go up and down completely randomly.
Pair Corralation between LG Household and Industrial Bank
Assuming the 90 days trading horizon LG Household Healthcare is expected to under-perform the Industrial Bank. In addition to that, LG Household is 1.65 times more volatile than Industrial Bank. It trades about -0.1 of its total potential returns per unit of risk. Industrial Bank is currently generating about 0.03 per unit of volatility. If you would invest 1,472,000 in Industrial Bank on October 25, 2024 and sell it today you would earn a total of 26,000 from holding Industrial Bank or generate 1.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
LG Household Healthcare vs. Industrial Bank
Performance |
| Timeline |
| LG Household Healthcare |
| Industrial Bank |
LG Household and Industrial Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LG Household and Industrial Bank
The main advantage of trading using opposite LG Household and Industrial Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LG Household position performs unexpectedly, Industrial Bank 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 Industrial Bank will offset losses from the drop in Industrial Bank's long position.| LG Household vs. Industrial Bank | LG Household vs. Pureun Mutual Savings | LG Household vs. Dongbang Transport Logistics | LG Household vs. Hotel Shilla Co |
| Industrial Bank vs. Samsung Electronics Co | Industrial Bank vs. Samsung Electronics Co | Industrial Bank vs. SK Hynix | Industrial Bank vs. HMM 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 Anywhere module to track or share privately all of your investments from the convenience of any device.
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