Correlation Between LG Household and Dong A
Can any of the company-specific risk be diversified away by investing in both LG Household and Dong A 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 Dong A 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 Dong A Steel Technology, you can compare the effects of market volatilities on LG Household and Dong A 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 Dong A. Check out your portfolio center. Please also check ongoing floating volatility patterns of LG Household and Dong A.
Diversification Opportunities for LG Household and Dong A
-0.69 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between 051905 and Dong is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding LG Household Healthcare and Dong A Steel Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dong A 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 Dong A. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dong A Steel has no effect on the direction of LG Household i.e., LG Household and Dong A go up and down completely randomly.
Pair Corralation between LG Household and Dong A
Assuming the 90 days trading horizon LG Household Healthcare is expected to under-perform the Dong A. But the stock apears to be less risky and, when comparing its historical volatility, LG Household Healthcare is 2.51 times less risky than Dong A. The stock trades about -0.1 of its potential returns per unit of risk. The Dong A Steel Technology is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 319,500 in Dong A Steel Technology on September 4, 2024 and sell it today you would earn a total of 10,500 from holding Dong A Steel Technology or generate 3.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
LG Household Healthcare vs. Dong A Steel Technology
Performance |
| Timeline |
| LG Household Healthcare |
| Dong A Steel |
LG Household and Dong A Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LG Household and Dong A
The main advantage of trading using opposite LG Household and Dong A positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LG Household position performs unexpectedly, Dong A 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 Dong A will offset losses from the drop in Dong A's long position.| LG Household vs. LG Household Healthcare | LG Household vs. Amorepacific Corp | LG Household vs. Mirae Asset No2 | LG Household vs. Aekyung Industrial Co |
| Dong A vs. AptaBio Therapeutics | Dong A vs. Daewoo SBI SPAC | Dong A vs. Dream Security co | Dong A 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
Other Complementary Tools
| Idea Breakdown Analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes | |
| Watchlist Optimization Optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm | |
| Premium Stories Follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope | |
| Content Syndication Quickly integrate customizable finance content to your own investment portal | |
| ETF Categories List of ETF categories grouped based on various criteria, such as the investment strategy or type of investments |