Correlation Between LG Household and FOODWELL
Can any of the company-specific risk be diversified away by investing in both LG Household and FOODWELL 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 FOODWELL 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 FOODWELL Co, you can compare the effects of market volatilities on LG Household and FOODWELL 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 FOODWELL. Check out your portfolio center. Please also check ongoing floating volatility patterns of LG Household and FOODWELL.
Diversification Opportunities for LG Household and FOODWELL
-0.24 | Correlation Coefficient |
Very good diversification
The 3 months correlation between 051905 and FOODWELL is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding LG Household Healthcare and FOODWELL Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FOODWELL 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 FOODWELL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FOODWELL has no effect on the direction of LG Household i.e., LG Household and FOODWELL go up and down completely randomly.
Pair Corralation between LG Household and FOODWELL
Assuming the 90 days trading horizon LG Household Healthcare is expected to under-perform the FOODWELL. But the stock apears to be less risky and, when comparing its historical volatility, LG Household Healthcare is 1.88 times less risky than FOODWELL. The stock trades about -0.48 of its potential returns per unit of risk. The FOODWELL Co is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 504,000 in FOODWELL Co on October 28, 2024 and sell it today you would earn a total of 20,000 from holding FOODWELL Co or generate 3.97% 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. FOODWELL Co
Performance |
| Timeline |
| LG Household Healthcare |
| FOODWELL |
LG Household and FOODWELL Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LG Household and FOODWELL
The main advantage of trading using opposite LG Household and FOODWELL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LG Household position performs unexpectedly, FOODWELL 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 FOODWELL will offset losses from the drop in FOODWELL's long position.| LG Household vs. LG Household Healthcare | LG Household vs. Aekyung Industrial Co | LG Household vs. CKH Food Health |
| FOODWELL vs. Busan Industrial Co | FOODWELL vs. Busan Ind | FOODWELL vs. RPBio Inc | FOODWELL vs. Finebesteel |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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