Correlation Between LG Household and Han Kook
Can any of the company-specific risk be diversified away by investing in both LG Household and Han Kook 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 Han Kook 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 Han Kook Steel, you can compare the effects of market volatilities on LG Household and Han Kook 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 Han Kook. Check out your portfolio center. Please also check ongoing floating volatility patterns of LG Household and Han Kook.
Diversification Opportunities for LG Household and Han Kook
0.34 | Correlation Coefficient |
Weak diversification
The 3 months correlation between 051905 and Han is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding LG Household Healthcare and Han Kook Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Han Kook Steel 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 Han Kook. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Han Kook Steel has no effect on the direction of LG Household i.e., LG Household and Han Kook go up and down completely randomly.
Pair Corralation between LG Household and Han Kook
Assuming the 90 days trading horizon LG Household Healthcare is expected to generate 0.3 times more return on investment than Han Kook. However, LG Household Healthcare is 3.28 times less risky than Han Kook. It trades about -0.31 of its potential returns per unit of risk. Han Kook Steel is currently generating about -0.16 per unit of risk. If you would invest 14,000,000 in LG Household Healthcare on October 30, 2024 and sell it today you would lose (1,360,000) from holding LG Household Healthcare or give up 9.71% 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. Han Kook Steel
Performance |
| Timeline |
| LG Household Healthcare |
| Han Kook Steel |
LG Household and Han Kook Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LG Household and Han Kook
The main advantage of trading using opposite LG Household and Han Kook positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LG Household position performs unexpectedly, Han Kook 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 Han Kook will offset losses from the drop in Han Kook'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 |
| Han Kook vs. V One Tech Co | Han Kook vs. Hanshin Construction Co | Han Kook vs. Dongkuk Structures Construction | Han Kook vs. Woorim Machinery 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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