Correlation Between LG Household and Foodnamoo
Can any of the company-specific risk be diversified away by investing in both LG Household and Foodnamoo 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 Foodnamoo 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 Foodnamoo, you can compare the effects of market volatilities on LG Household and Foodnamoo 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 Foodnamoo. Check out your portfolio center. Please also check ongoing floating volatility patterns of LG Household and Foodnamoo.
Diversification Opportunities for LG Household and Foodnamoo
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between 051900 and Foodnamoo is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding LG Household Healthcare and Foodnamoo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Foodnamoo 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 Foodnamoo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Foodnamoo has no effect on the direction of LG Household i.e., LG Household and Foodnamoo go up and down completely randomly.
Pair Corralation between LG Household and Foodnamoo
Assuming the 90 days trading horizon LG Household Healthcare is expected to under-perform the Foodnamoo. But the stock apears to be less risky and, when comparing its historical volatility, LG Household Healthcare is 2.23 times less risky than Foodnamoo. The stock trades about -0.28 of its potential returns per unit of risk. The Foodnamoo is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest 297,500 in Foodnamoo on October 11, 2024 and sell it today you would lose (17,500) from holding Foodnamoo or give up 5.88% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.0% |
| Values | Daily Returns |
LG Household Healthcare vs. Foodnamoo
Performance |
| Timeline |
| LG Household Healthcare |
| Foodnamoo |
LG Household and Foodnamoo Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LG Household and Foodnamoo
The main advantage of trading using opposite LG Household and Foodnamoo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LG Household position performs unexpectedly, Foodnamoo 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 Foodnamoo will offset losses from the drop in Foodnamoo's long position.| LG Household vs. Dongbang Ship Machinery | LG Household vs. ENERGYMACHINERY KOREA CoLtd | LG Household vs. Sungdo Engineering Construction | LG Household vs. Wireless Power Amplifier |
| Foodnamoo vs. Samyang Foods Co | Foodnamoo vs. Union Materials Corp | Foodnamoo vs. Haitai Confectionery Foods | Foodnamoo vs. Top Material 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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