Correlation Between LG Household and Hankook Furniture
Can any of the company-specific risk be diversified away by investing in both LG Household and Hankook Furniture 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 Hankook Furniture 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 Hankook Furniture Co, you can compare the effects of market volatilities on LG Household and Hankook Furniture 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 Hankook Furniture. Check out your portfolio center. Please also check ongoing floating volatility patterns of LG Household and Hankook Furniture.
Diversification Opportunities for LG Household and Hankook Furniture
-0.65 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between 051905 and Hankook is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding LG Household Healthcare and Hankook Furniture Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hankook Furniture 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 Hankook Furniture. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hankook Furniture has no effect on the direction of LG Household i.e., LG Household and Hankook Furniture go up and down completely randomly.
Pair Corralation between LG Household and Hankook Furniture
Assuming the 90 days trading horizon LG Household Healthcare is expected to under-perform the Hankook Furniture. But the stock apears to be less risky and, when comparing its historical volatility, LG Household Healthcare is 1.55 times less risky than Hankook Furniture. The stock trades about -0.31 of its potential returns per unit of risk. The Hankook Furniture Co is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 391,586 in Hankook Furniture Co on October 30, 2024 and sell it today you would earn a total of 11,414 from holding Hankook Furniture Co or generate 2.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
LG Household Healthcare vs. Hankook Furniture Co
Performance |
| Timeline |
| LG Household Healthcare |
| Hankook Furniture |
LG Household and Hankook Furniture Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LG Household and Hankook Furniture
The main advantage of trading using opposite LG Household and Hankook Furniture positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LG Household position performs unexpectedly, Hankook Furniture 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 Hankook Furniture will offset losses from the drop in Hankook Furniture's long position.| LG Household vs. Dongnam Chemical Co | LG Household vs. KPX Green Chemical | LG Household vs. Seoul Semiconductor Co | LG Household vs. Homecast CoLtd |
| Hankook Furniture vs. Samsung Electronics Co | Hankook Furniture vs. Samsung Electronics Co | Hankook Furniture vs. KB Financial Group | Hankook Furniture vs. Shinhan 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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