Correlation Between LG Household and Dongsuh
Can any of the company-specific risk be diversified away by investing in both LG Household and Dongsuh 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 Dongsuh 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 Dongsuh, you can compare the effects of market volatilities on LG Household and Dongsuh 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 Dongsuh. Check out your portfolio center. Please also check ongoing floating volatility patterns of LG Household and Dongsuh.
Diversification Opportunities for LG Household and Dongsuh
-0.64 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between 051900 and Dongsuh is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding LG Household Healthcare and Dongsuh in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dongsuh 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 Dongsuh. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dongsuh has no effect on the direction of LG Household i.e., LG Household and Dongsuh go up and down completely randomly.
Pair Corralation between LG Household and Dongsuh
Assuming the 90 days trading horizon LG Household Healthcare is expected to under-perform the Dongsuh. But the stock apears to be less risky and, when comparing its historical volatility, LG Household Healthcare is 2.29 times less risky than Dongsuh. The stock trades about -0.07 of its potential returns per unit of risk. The Dongsuh is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 1,854,000 in Dongsuh on September 3, 2024 and sell it today you would earn a total of 941,000 from holding Dongsuh or generate 50.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
LG Household Healthcare vs. Dongsuh
Performance |
| Timeline |
| LG Household Healthcare |
| Dongsuh |
LG Household and Dongsuh Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LG Household and Dongsuh
The main advantage of trading using opposite LG Household and Dongsuh positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LG Household position performs unexpectedly, Dongsuh 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 Dongsuh will offset losses from the drop in Dongsuh'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 |
| Dongsuh vs. Samyang Foods Co | Dongsuh vs. FNSTech Co | Dongsuh vs. Sempio Foods Co | Dongsuh vs. Lotte Chilsung Beverage |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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