Correlation Between LG Household and TAEYANG
Can any of the company-specific risk be diversified away by investing in both LG Household and TAEYANG 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 TAEYANG 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 TAEYANG, you can compare the effects of market volatilities on LG Household and TAEYANG 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 TAEYANG. Check out your portfolio center. Please also check ongoing floating volatility patterns of LG Household and TAEYANG.
Diversification Opportunities for LG Household and TAEYANG
-0.33 | Correlation Coefficient |
Very good diversification
The 3 months correlation between 051905 and TAEYANG is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding LG Household Healthcare and TAEYANG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TAEYANG 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 TAEYANG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TAEYANG has no effect on the direction of LG Household i.e., LG Household and TAEYANG go up and down completely randomly.
Pair Corralation between LG Household and TAEYANG
Assuming the 90 days trading horizon LG Household Healthcare is expected to under-perform the TAEYANG. But the stock apears to be less risky and, when comparing its historical volatility, LG Household Healthcare is 3.01 times less risky than TAEYANG. The stock trades about -0.44 of its potential returns per unit of risk. The TAEYANG is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 605,409 in TAEYANG on October 15, 2024 and sell it today you would earn a total of 34,591 from holding TAEYANG or generate 5.71% 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. TAEYANG
Performance |
| Timeline |
| LG Household Healthcare |
| TAEYANG |
LG Household and TAEYANG Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LG Household and TAEYANG
The main advantage of trading using opposite LG Household and TAEYANG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LG Household position performs unexpectedly, TAEYANG 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 TAEYANG will offset losses from the drop in TAEYANG's long position.| LG Household vs. Cheryong Industrial CoLtd | LG Household vs. Heungkuk Metaltech CoLtd | LG Household vs. Shinil Industrial Co | LG Household vs. Mgame Corp |
| TAEYANG vs. MEDIANA CoLtd | TAEYANG vs. Seohee Construction Co | TAEYANG vs. GS Engineering Construction | TAEYANG vs. SAMG Entertainment 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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