Correlation Between LG Household and Pan Entertainment
Can any of the company-specific risk be diversified away by investing in both LG Household and Pan Entertainment 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 Pan Entertainment 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 Pan Entertainment Co, you can compare the effects of market volatilities on LG Household and Pan Entertainment 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 Pan Entertainment. Check out your portfolio center. Please also check ongoing floating volatility patterns of LG Household and Pan Entertainment.
Diversification Opportunities for LG Household and Pan Entertainment
-0.34 | Correlation Coefficient |
Very good diversification
The 3 months correlation between 051900 and Pan is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding LG Household Healthcare and Pan Entertainment Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pan Entertainment 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 Pan Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pan Entertainment has no effect on the direction of LG Household i.e., LG Household and Pan Entertainment go up and down completely randomly.
Pair Corralation between LG Household and Pan Entertainment
Assuming the 90 days trading horizon LG Household Healthcare is expected to under-perform the Pan Entertainment. But the stock apears to be less risky and, when comparing its historical volatility, LG Household Healthcare is 1.01 times less risky than Pan Entertainment. The stock trades about -0.04 of its potential returns per unit of risk. The Pan Entertainment Co is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 233,000 in Pan Entertainment Co on October 18, 2024 and sell it today you would earn a total of 7,000 from holding Pan Entertainment Co or generate 3.0% 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. Pan Entertainment Co
Performance |
| Timeline |
| LG Household Healthcare |
| Pan Entertainment |
LG Household and Pan Entertainment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LG Household and Pan Entertainment
The main advantage of trading using opposite LG Household and Pan Entertainment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LG Household position performs unexpectedly, Pan Entertainment 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 Pan Entertainment will offset losses from the drop in Pan Entertainment's long position.| LG Household vs. SungMoon Electronics Co | LG Household vs. Samsung Electronics Co | LG Household vs. Moadata Co | LG Household vs. Anam Electronics Co |
| Pan Entertainment vs. Korea Computer | Pan Entertainment vs. CG Hi Tech | Pan Entertainment vs. Lotte Non Life Insurance | Pan Entertainment vs. LG Household Healthcare |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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