Correlation Between LG Household and YG Entertainment
Can any of the company-specific risk be diversified away by investing in both LG Household and YG 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 YG 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 YG Entertainment, you can compare the effects of market volatilities on LG Household and YG 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 YG Entertainment. Check out your portfolio center. Please also check ongoing floating volatility patterns of LG Household and YG Entertainment.
Diversification Opportunities for LG Household and YG Entertainment
-0.14 | Correlation Coefficient |
Good diversification
The 3 months correlation between 051900 and 122870 is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding LG Household Healthcare and YG Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on YG 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 YG Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of YG Entertainment has no effect on the direction of LG Household i.e., LG Household and YG Entertainment go up and down completely randomly.
Pair Corralation between LG Household and YG Entertainment
Assuming the 90 days trading horizon LG Household Healthcare is expected to under-perform the YG Entertainment. But the stock apears to be less risky and, when comparing its historical volatility, LG Household Healthcare is 1.22 times less risky than YG Entertainment. The stock trades about -0.04 of its potential returns per unit of risk. The YG Entertainment is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 5,993,711 in YG Entertainment on November 27, 2024 and sell it today you would lose (233,711) from holding YG Entertainment or give up 3.9% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
LG Household Healthcare vs. YG Entertainment
Performance |
| Timeline |
| LG Household Healthcare |
| YG Entertainment |
LG Household and YG Entertainment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LG Household and YG Entertainment
The main advantage of trading using opposite LG Household and YG Entertainment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LG Household position performs unexpectedly, YG 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 YG Entertainment will offset losses from the drop in YG Entertainment's long position.| LG Household vs. SK Telecom Co | LG Household vs. LG Household Healthcare | LG Household vs. Kukil Metal Co | LG Household vs. KT Submarine Telecom |
| YG Entertainment vs. Samsung Electronics Co | YG Entertainment vs. Samsung Electronics Co | YG Entertainment vs. LG Energy Solution | YG Entertainment vs. SK Hynix |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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