Correlation Between LG Household and Dongbang Transport
Can any of the company-specific risk be diversified away by investing in both LG Household and Dongbang Transport 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 Dongbang Transport 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 Dongbang Transport Logistics, you can compare the effects of market volatilities on LG Household and Dongbang Transport 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 Dongbang Transport. Check out your portfolio center. Please also check ongoing floating volatility patterns of LG Household and Dongbang Transport.
Diversification Opportunities for LG Household and Dongbang Transport
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between 051905 and Dongbang is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding LG Household Healthcare and Dongbang Transport Logistics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dongbang Transport 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 Dongbang Transport. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dongbang Transport has no effect on the direction of LG Household i.e., LG Household and Dongbang Transport go up and down completely randomly.
Pair Corralation between LG Household and Dongbang Transport
Assuming the 90 days trading horizon LG Household Healthcare is expected to under-perform the Dongbang Transport. But the stock apears to be less risky and, when comparing its historical volatility, LG Household Healthcare is 2.0 times less risky than Dongbang Transport. The stock trades about -0.22 of its potential returns per unit of risk. The Dongbang Transport Logistics is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest 236,000 in Dongbang Transport Logistics on October 26, 2024 and sell it today you would lose (10,000) from holding Dongbang Transport Logistics or give up 4.24% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
LG Household Healthcare vs. Dongbang Transport Logistics
Performance |
| Timeline |
| LG Household Healthcare |
| Dongbang Transport |
LG Household and Dongbang Transport Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LG Household and Dongbang Transport
The main advantage of trading using opposite LG Household and Dongbang Transport positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LG Household position performs unexpectedly, Dongbang Transport 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 Dongbang Transport will offset losses from the drop in Dongbang Transport's long position.| LG Household vs. LG Household Healthcare | LG Household vs. Aekyung Industrial Co | LG Household vs. CKH Food Health |
| Dongbang Transport vs. KB Financial Group | Dongbang Transport vs. Shinhan Financial Group | Dongbang Transport vs. Hana Financial | Dongbang Transport vs. Woori Financial Group |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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