Correlation Between LG Household and Mgame Corp
Can any of the company-specific risk be diversified away by investing in both LG Household and Mgame Corp 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 Mgame Corp 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 Mgame Corp, you can compare the effects of market volatilities on LG Household and Mgame Corp 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 Mgame Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of LG Household and Mgame Corp.
Diversification Opportunities for LG Household and Mgame Corp
-0.14 | Correlation Coefficient |
Good diversification
The 3 months correlation between 051905 and Mgame is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding LG Household Healthcare and Mgame Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mgame Corp 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 Mgame Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mgame Corp has no effect on the direction of LG Household i.e., LG Household and Mgame Corp go up and down completely randomly.
Pair Corralation between LG Household and Mgame Corp
Assuming the 90 days trading horizon LG Household Healthcare is expected to under-perform the Mgame Corp. But the stock apears to be less risky and, when comparing its historical volatility, LG Household Healthcare is 1.1 times less risky than Mgame Corp. The stock trades about -0.06 of its potential returns per unit of risk. The Mgame Corp is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest 821,530 in Mgame Corp on August 30, 2024 and sell it today you would lose (260,530) from holding Mgame Corp or give up 31.71% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.63% |
| Values | Daily Returns |
LG Household Healthcare vs. Mgame Corp
Performance |
| Timeline |
| LG Household Healthcare |
| Mgame Corp |
LG Household and Mgame Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LG Household and Mgame Corp
The main advantage of trading using opposite LG Household and Mgame Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LG Household position performs unexpectedly, Mgame Corp 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 Mgame Corp will offset losses from the drop in Mgame Corp's long position.| LG Household vs. LG Household Healthcare | LG Household vs. Amorepacific Corp | LG Household vs. CKH Food Health |
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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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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