Correlation Between LG Household and Woori Technology
Can any of the company-specific risk be diversified away by investing in both LG Household and Woori Technology 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 Woori Technology 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 Woori Technology, you can compare the effects of market volatilities on LG Household and Woori Technology 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 Woori Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of LG Household and Woori Technology.
Diversification Opportunities for LG Household and Woori Technology
-0.06 | Correlation Coefficient |
Good diversification
The 3 months correlation between 051900 and Woori is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding LG Household Healthcare and Woori Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Woori Technology 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 Woori Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Woori Technology has no effect on the direction of LG Household i.e., LG Household and Woori Technology go up and down completely randomly.
Pair Corralation between LG Household and Woori Technology
Assuming the 90 days trading horizon LG Household Healthcare is expected to under-perform the Woori Technology. But the stock apears to be less risky and, when comparing its historical volatility, LG Household Healthcare is 1.15 times less risky than Woori Technology. The stock trades about -0.14 of its potential returns per unit of risk. The Woori Technology is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 224,000 in Woori Technology on August 29, 2024 and sell it today you would earn a total of 10,500 from holding Woori Technology or generate 4.69% 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. Woori Technology
Performance |
| Timeline |
| LG Household Healthcare |
| Woori Technology |
LG Household and Woori Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LG Household and Woori Technology
The main advantage of trading using opposite LG Household and Woori Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LG Household position performs unexpectedly, Woori Technology 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 Woori Technology will offset losses from the drop in Woori Technology'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 |
| Woori Technology vs. Daou Data Corp | Woori Technology vs. Busan Industrial Co | Woori Technology vs. Busan Ind | Woori Technology vs. Shinhan WTI Futures |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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