Correlation Between LG Household and Hyundai Engineering
Can any of the company-specific risk be diversified away by investing in both LG Household and Hyundai Engineering 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 Hyundai Engineering 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 Hyundai Engineering Construction, you can compare the effects of market volatilities on LG Household and Hyundai Engineering 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 Hyundai Engineering. Check out your portfolio center. Please also check ongoing floating volatility patterns of LG Household and Hyundai Engineering.
Diversification Opportunities for LG Household and Hyundai Engineering
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between 051905 and Hyundai is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding LG Household Healthcare and Hyundai Engineering Constructi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hyundai Engineering 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 Hyundai Engineering. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hyundai Engineering has no effect on the direction of LG Household i.e., LG Household and Hyundai Engineering go up and down completely randomly.
Pair Corralation between LG Household and Hyundai Engineering
Assuming the 90 days trading horizon LG Household Healthcare is expected to generate 1.27 times more return on investment than Hyundai Engineering. However, LG Household is 1.27 times more volatile than Hyundai Engineering Construction. It trades about -0.07 of its potential returns per unit of risk. Hyundai Engineering Construction is currently generating about -0.19 per unit of risk. If you would invest 15,750,000 in LG Household Healthcare on August 29, 2024 and sell it today you would lose (1,190,000) from holding LG Household Healthcare or give up 7.56% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 98.31% |
| Values | Daily Returns |
LG Household Healthcare vs. Hyundai Engineering Constructi
Performance |
| Timeline |
| LG Household Healthcare |
| Hyundai Engineering |
LG Household and Hyundai Engineering Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LG Household and Hyundai Engineering
The main advantage of trading using opposite LG Household and Hyundai Engineering positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LG Household position performs unexpectedly, Hyundai Engineering 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 Hyundai Engineering will offset losses from the drop in Hyundai Engineering's long position.| LG Household vs. LG Household Healthcare | LG Household vs. Amorepacific Corp | LG Household vs. CKH Food Health |
| Hyundai Engineering vs. Sungmoon Electronics Co | Hyundai Engineering vs. Samlip General Foods | Hyundai Engineering vs. Grand Korea Leisure | Hyundai Engineering vs. KyungIn Electronics 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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