Correlation Between LG Household and Namhwa Industrial
Can any of the company-specific risk be diversified away by investing in both LG Household and Namhwa Industrial 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 Namhwa Industrial 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 Namhwa Industrial Co, you can compare the effects of market volatilities on LG Household and Namhwa Industrial 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 Namhwa Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of LG Household and Namhwa Industrial.
Diversification Opportunities for LG Household and Namhwa Industrial
-0.5 | Correlation Coefficient |
Very good diversification
The 3 months correlation between 051900 and Namhwa is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding LG Household Healthcare and Namhwa Industrial Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Namhwa Industrial 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 Namhwa Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Namhwa Industrial has no effect on the direction of LG Household i.e., LG Household and Namhwa Industrial go up and down completely randomly.
Pair Corralation between LG Household and Namhwa Industrial
Assuming the 90 days trading horizon LG Household Healthcare is expected to under-perform the Namhwa Industrial. But the stock apears to be less risky and, when comparing its historical volatility, LG Household Healthcare is 1.56 times less risky than Namhwa Industrial. The stock trades about -0.21 of its potential returns per unit of risk. The Namhwa Industrial Co is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest 511,000 in Namhwa Industrial Co on November 7, 2024 and sell it today you would lose (7,000) from holding Namhwa Industrial Co or give up 1.37% 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. Namhwa Industrial Co
Performance |
| Timeline |
| LG Household Healthcare |
| Namhwa Industrial |
LG Household and Namhwa Industrial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LG Household and Namhwa Industrial
The main advantage of trading using opposite LG Household and Namhwa Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LG Household position performs unexpectedly, Namhwa Industrial 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 Namhwa Industrial will offset losses from the drop in Namhwa Industrial's long position.| LG Household vs. Daechang Steel Co | LG Household vs. Hyundai BNG Steel | LG Household vs. Samhyun Steel Co | LG Household vs. Automobile Pc |
| Namhwa Industrial vs. Pan Entertainment Co | Namhwa Industrial vs. JYP Entertainment | Namhwa Industrial vs. AeroSpace Technology of | Namhwa Industrial vs. Eagon Industrial 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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