Correlation Between LG Household and Cosmax Nbt
Can any of the company-specific risk be diversified away by investing in both LG Household and Cosmax Nbt 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 Cosmax Nbt 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 Cosmax Nbt, you can compare the effects of market volatilities on LG Household and Cosmax Nbt 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 Cosmax Nbt. Check out your portfolio center. Please also check ongoing floating volatility patterns of LG Household and Cosmax Nbt.
Diversification Opportunities for LG Household and Cosmax Nbt
-0.35 | Correlation Coefficient |
Very good diversification
The 3 months correlation between 051900 and Cosmax is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding LG Household Healthcare and Cosmax Nbt in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cosmax Nbt 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 Cosmax Nbt. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cosmax Nbt has no effect on the direction of LG Household i.e., LG Household and Cosmax Nbt go up and down completely randomly.
Pair Corralation between LG Household and Cosmax Nbt
Assuming the 90 days trading horizon LG Household Healthcare is expected to generate 0.6 times more return on investment than Cosmax Nbt. However, LG Household Healthcare is 1.68 times less risky than Cosmax Nbt. It trades about -0.1 of its potential returns per unit of risk. Cosmax Nbt is currently generating about -0.07 per unit of risk. If you would invest 33,200,000 in LG Household Healthcare on September 2, 2024 and sell it today you would lose (2,150,000) from holding LG Household Healthcare or give up 6.48% 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. Cosmax Nbt
Performance |
| Timeline |
| LG Household Healthcare |
| Cosmax Nbt |
LG Household and Cosmax Nbt Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LG Household and Cosmax Nbt
The main advantage of trading using opposite LG Household and Cosmax Nbt positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LG Household position performs unexpectedly, Cosmax Nbt 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 Cosmax Nbt will offset losses from the drop in Cosmax Nbt's long position.| LG Household vs. Korea Real Estate | LG Household vs. Korea Ratings Co | LG Household vs. IQuest Co | LG Household vs. Wonbang Tech Co |
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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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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