Correlation Between LG Household and Asia Technology
Can any of the company-specific risk be diversified away by investing in both LG Household and Asia Technology 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 Asia Technology 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 Asia Technology Co, you can compare the effects of market volatilities on LG Household and Asia Technology 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 Asia Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of LG Household and Asia Technology.
Diversification Opportunities for LG Household and Asia Technology
-0.48 | Correlation Coefficient |
Very good diversification
The 3 months correlation between 051905 and Asia is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding LG Household Healthcare and Asia Technology Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Asia Technology 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 Asia Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Asia Technology has no effect on the direction of LG Household i.e., LG Household and Asia Technology go up and down completely randomly.
Pair Corralation between LG Household and Asia Technology
Assuming the 90 days trading horizon LG Household Healthcare is expected to under-perform the Asia Technology. But the stock apears to be less risky and, when comparing its historical volatility, LG Household Healthcare is 1.24 times less risky than Asia Technology. The stock trades about -0.07 of its potential returns per unit of risk. The Asia Technology Co is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 220,000 in Asia Technology Co on August 28, 2024 and sell it today you would earn a total of 0.00 from holding Asia Technology Co or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
LG Household Healthcare vs. Asia Technology Co
Performance |
| Timeline |
| LG Household Healthcare |
| Asia Technology |
LG Household and Asia Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LG Household and Asia Technology
The main advantage of trading using opposite LG Household and Asia Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LG Household position performs unexpectedly, Asia Technology 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 Asia Technology will offset losses from the drop in Asia Technology's long position.| LG Household vs. Jeil Steel Mfg | LG Household vs. Dongbu Steel Co | LG Household vs. Cuckoo Homesys Co | LG Household vs. Daejung Chemicals Metals |
| Asia Technology vs. Lotte Data Communication | Asia Technology vs. Eugene Technology CoLtd | Asia Technology vs. Daishin Information Communications | Asia Technology vs. Guyoung Technology 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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