Correlation Between LG Household and Doosan Heavy
Can any of the company-specific risk be diversified away by investing in both LG Household and Doosan Heavy 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 Doosan Heavy 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 Doosan Heavy Ind, you can compare the effects of market volatilities on LG Household and Doosan Heavy 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 Doosan Heavy. Check out your portfolio center. Please also check ongoing floating volatility patterns of LG Household and Doosan Heavy.
Diversification Opportunities for LG Household and Doosan Heavy
-0.48 | Correlation Coefficient |
Very good diversification
The 3 months correlation between 051900 and Doosan is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding LG Household Healthcare and Doosan Heavy Ind in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Doosan Heavy Ind 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 Doosan Heavy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Doosan Heavy Ind has no effect on the direction of LG Household i.e., LG Household and Doosan Heavy go up and down completely randomly.
Pair Corralation between LG Household and Doosan Heavy
Assuming the 90 days trading horizon LG Household Healthcare is expected to generate 0.72 times more return on investment than Doosan Heavy. However, LG Household Healthcare is 1.38 times less risky than Doosan Heavy. It trades about -0.05 of its potential returns per unit of risk. Doosan Heavy Ind is currently generating about -0.21 per unit of risk. If you would invest 34,700,000 in LG Household Healthcare on September 12, 2024 and sell it today you would lose (1,300,000) from holding LG Household Healthcare or give up 3.75% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
LG Household Healthcare vs. Doosan Heavy Ind
Performance |
| Timeline |
| LG Household Healthcare |
| Doosan Heavy Ind |
LG Household and Doosan Heavy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LG Household and Doosan Heavy
The main advantage of trading using opposite LG Household and Doosan Heavy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LG Household position performs unexpectedly, Doosan Heavy 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 Doosan Heavy will offset losses from the drop in Doosan Heavy'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 |
| Doosan Heavy vs. Histeel | Doosan Heavy vs. Alton Sports CoLtd | Doosan Heavy vs. Hankuk Steel Wire | Doosan Heavy vs. Samhyun Steel 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 Global Correlations module to find global opportunities by holding instruments from different markets.
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