Correlation Between LG Household and NH Investment
Can any of the company-specific risk be diversified away by investing in both LG Household and NH Investment 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 NH Investment 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 NH Investment Securities, you can compare the effects of market volatilities on LG Household and NH Investment 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 NH Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of LG Household and NH Investment.
Diversification Opportunities for LG Household and NH Investment
0.33 | Correlation Coefficient |
Weak diversification
The 3 months correlation between 051905 and 005940 is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding LG Household Healthcare and NH Investment Securities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NH Investment Securities 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 NH Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NH Investment Securities has no effect on the direction of LG Household i.e., LG Household and NH Investment go up and down completely randomly.
Pair Corralation between LG Household and NH Investment
Assuming the 90 days trading horizon LG Household Healthcare is expected to under-perform the NH Investment. But the stock apears to be less risky and, when comparing its historical volatility, LG Household Healthcare is 1.28 times less risky than NH Investment. The stock trades about -0.37 of its potential returns per unit of risk. The NH Investment Securities is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest 1,380,000 in NH Investment Securities on August 24, 2024 and sell it today you would lose (30,000) from holding NH Investment Securities or give up 2.17% 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. NH Investment Securities
Performance |
| Timeline |
| LG Household Healthcare |
| NH Investment Securities |
LG Household and NH Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LG Household and NH Investment
The main advantage of trading using opposite LG Household and NH Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LG Household position performs unexpectedly, NH Investment 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 NH Investment will offset losses from the drop in NH Investment's long position.| LG Household vs. Lotte Data Communication | LG Household vs. Dongil Metal Co | LG Household vs. Daiyang Metal Co | LG Household vs. Ssangyong Information Communication |
| NH Investment vs. AptaBio Therapeutics | NH Investment vs. Daewoo SBI SPAC | NH Investment vs. Dream Security co | NH Investment vs. Microfriend |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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