Correlation Between LG Household and Dongsin Engineering
Can any of the company-specific risk be diversified away by investing in both LG Household and Dongsin Engineering 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 Dongsin Engineering 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 Dongsin Engineering Construction, you can compare the effects of market volatilities on LG Household and Dongsin Engineering 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 Dongsin Engineering. Check out your portfolio center. Please also check ongoing floating volatility patterns of LG Household and Dongsin Engineering.
Diversification Opportunities for LG Household and Dongsin Engineering
-0.17 | Correlation Coefficient |
Good diversification
The 3 months correlation between 051900 and Dongsin is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding LG Household Healthcare and Dongsin Engineering Constructi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dongsin Engineering 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 Dongsin Engineering. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dongsin Engineering has no effect on the direction of LG Household i.e., LG Household and Dongsin Engineering go up and down completely randomly.
Pair Corralation between LG Household and Dongsin Engineering
Assuming the 90 days trading horizon LG Household Healthcare is expected to under-perform the Dongsin Engineering. But the stock apears to be less risky and, when comparing its historical volatility, LG Household Healthcare is 2.25 times less risky than Dongsin Engineering. The stock trades about -0.05 of its potential returns per unit of risk. The Dongsin Engineering Construction is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 1,391,538 in Dongsin Engineering Construction on September 12, 2024 and sell it today you would earn a total of 5,188,462 from holding Dongsin Engineering Construction or generate 372.86% 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. Dongsin Engineering Constructi
Performance |
| Timeline |
| LG Household Healthcare |
| Dongsin Engineering |
LG Household and Dongsin Engineering Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LG Household and Dongsin Engineering
The main advantage of trading using opposite LG Household and Dongsin Engineering positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LG Household position performs unexpectedly, Dongsin Engineering 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 Dongsin Engineering will offset losses from the drop in Dongsin Engineering's long position.| LG Household vs. Korea New Network | LG Household vs. ICD Co | LG Household vs. DYPNF CoLtd | LG Household vs. Solution Advanced Technology |
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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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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