Correlation Between LG Household and Chin Yang
Can any of the company-specific risk be diversified away by investing in both LG Household and Chin Yang 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 Chin Yang 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 Chin Yang Chemical, you can compare the effects of market volatilities on LG Household and Chin Yang 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 Chin Yang. Check out your portfolio center. Please also check ongoing floating volatility patterns of LG Household and Chin Yang.
Diversification Opportunities for LG Household and Chin Yang
0.37 | Correlation Coefficient |
Weak diversification
The 3 months correlation between 051900 and Chin is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding LG Household Healthcare and Chin Yang Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chin Yang Chemical 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 Chin Yang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chin Yang Chemical has no effect on the direction of LG Household i.e., LG Household and Chin Yang go up and down completely randomly.
Pair Corralation between LG Household and Chin Yang
Assuming the 90 days trading horizon LG Household Healthcare is expected to generate 1.29 times more return on investment than Chin Yang. However, LG Household is 1.29 times more volatile than Chin Yang Chemical. It trades about 0.01 of its potential returns per unit of risk. Chin Yang Chemical is currently generating about -0.01 per unit of risk. If you would invest 33,150,000 in LG Household Healthcare on August 25, 2024 and sell it today you would lose (600,000) from holding LG Household Healthcare or give up 1.81% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
LG Household Healthcare vs. Chin Yang Chemical
Performance |
| Timeline |
| LG Household Healthcare |
| Chin Yang Chemical |
LG Household and Chin Yang Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LG Household and Chin Yang
The main advantage of trading using opposite LG Household and Chin Yang positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LG Household position performs unexpectedly, Chin Yang 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 Chin Yang will offset losses from the drop in Chin Yang's long position.| LG Household vs. AptaBio Therapeutics | LG Household vs. Daewoo SBI SPAC | LG Household vs. Dream Security co | LG Household vs. Microfriend |
| Chin Yang vs. AptaBio Therapeutics | Chin Yang vs. Daewoo SBI SPAC | Chin Yang vs. Dream Security co | Chin Yang vs. Microfriend |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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