Correlation Between LG Household and Tway Air
Can any of the company-specific risk be diversified away by investing in both LG Household and Tway Air 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 Tway Air 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 Tway Air Co, you can compare the effects of market volatilities on LG Household and Tway Air 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 Tway Air. Check out your portfolio center. Please also check ongoing floating volatility patterns of LG Household and Tway Air.
Diversification Opportunities for LG Household and Tway Air
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between 051900 and Tway is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding LG Household Healthcare and Tway Air Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tway Air 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 Tway Air. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tway Air has no effect on the direction of LG Household i.e., LG Household and Tway Air go up and down completely randomly.
Pair Corralation between LG Household and Tway Air
Assuming the 90 days trading horizon LG Household Healthcare is expected to under-perform the Tway Air. But the stock apears to be less risky and, when comparing its historical volatility, LG Household Healthcare is 1.19 times less risky than Tway Air. The stock trades about -0.06 of its potential returns per unit of risk. The Tway Air Co is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 309,500 in Tway Air Co on October 16, 2024 and sell it today you would lose (30,000) from holding Tway Air Co or give up 9.69% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
LG Household Healthcare vs. Tway Air Co
Performance |
| Timeline |
| LG Household Healthcare |
| Tway Air |
LG Household and Tway Air Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LG Household and Tway Air
The main advantage of trading using opposite LG Household and Tway Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LG Household position performs unexpectedly, Tway Air 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 Tway Air will offset losses from the drop in Tway Air's long position.| LG Household vs. Seoul Electronics Telecom | LG Household vs. Orbitech Co | LG Household vs. ABCO Electronics Co | LG Household vs. Yura Tech Co |
| Tway Air vs. Korean Reinsurance Co | Tway Air vs. Seoyon Topmetal Co | Tway Air vs. LG Household Healthcare | Tway Air vs. DONGKUK TED METAL |
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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