Correlation Between LG Household and Lotte Data
Can any of the company-specific risk be diversified away by investing in both LG Household and Lotte Data 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 Lotte Data 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 Lotte Data Communication, you can compare the effects of market volatilities on LG Household and Lotte Data 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 Lotte Data. Check out your portfolio center. Please also check ongoing floating volatility patterns of LG Household and Lotte Data.
Diversification Opportunities for LG Household and Lotte Data
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between 051900 and Lotte is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding LG Household Healthcare and Lotte Data Communication in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lotte Data Communication 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 Lotte Data. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lotte Data Communication has no effect on the direction of LG Household i.e., LG Household and Lotte Data go up and down completely randomly.
Pair Corralation between LG Household and Lotte Data
Assuming the 90 days trading horizon LG Household Healthcare is expected to under-perform the Lotte Data. But the stock apears to be less risky and, when comparing its historical volatility, LG Household Healthcare is 1.8 times less risky than Lotte Data. The stock trades about -0.08 of its potential returns per unit of risk. The Lotte Data Communication is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 1,990,000 in Lotte Data Communication on October 30, 2024 and sell it today you would lose (8,000) from holding Lotte Data Communication or give up 0.4% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
LG Household Healthcare vs. Lotte Data Communication
Performance |
| Timeline |
| LG Household Healthcare |
| Lotte Data Communication |
LG Household and Lotte Data Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LG Household and Lotte Data
The main advantage of trading using opposite LG Household and Lotte Data positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LG Household position performs unexpectedly, Lotte Data 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 Lotte Data will offset losses from the drop in Lotte Data's long position.| LG Household vs. Busan Industrial Co | LG Household vs. Busan Ind | LG Household vs. RPBio Inc | LG Household vs. Finebesteel |
| Lotte Data vs. Daiyang Metal Co | Lotte Data vs. CKH Food Health | Lotte Data vs. Seoyon Topmetal Co | Lotte Data vs. Korea 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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