Correlation Between LG Household and Carriesoft
Can any of the company-specific risk be diversified away by investing in both LG Household and Carriesoft 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 Carriesoft 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 Carriesoft Co, you can compare the effects of market volatilities on LG Household and Carriesoft 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 Carriesoft. Check out your portfolio center. Please also check ongoing floating volatility patterns of LG Household and Carriesoft.
Diversification Opportunities for LG Household and Carriesoft
-0.39 | Correlation Coefficient |
Very good diversification
The 3 months correlation between 051900 and Carriesoft is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding LG Household Healthcare and Carriesoft Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carriesoft 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 Carriesoft. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carriesoft has no effect on the direction of LG Household i.e., LG Household and Carriesoft go up and down completely randomly.
Pair Corralation between LG Household and Carriesoft
Assuming the 90 days trading horizon LG Household is expected to generate 17.23 times less return on investment than Carriesoft. But when comparing it to its historical volatility, LG Household Healthcare is 2.79 times less risky than Carriesoft. It trades about 0.03 of its potential returns per unit of risk. Carriesoft Co is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 402,500 in Carriesoft Co on November 27, 2024 and sell it today you would earn a total of 220,500 from holding Carriesoft Co or generate 54.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
LG Household Healthcare vs. Carriesoft Co
Performance |
| Timeline |
| LG Household Healthcare |
| Carriesoft |
LG Household and Carriesoft Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LG Household and Carriesoft
The main advantage of trading using opposite LG Household and Carriesoft positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LG Household position performs unexpectedly, Carriesoft 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 Carriesoft will offset losses from the drop in Carriesoft'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 |
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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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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