Correlation Between LG Household and Dong-A Steel
Can any of the company-specific risk be diversified away by investing in both LG Household and Dong-A Steel 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 Steel 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 Steel 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 Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of LG Household and Dong-A Steel.
Diversification Opportunities for LG Household and Dong-A Steel
-0.19 | Correlation Coefficient |
Good diversification
The 3 months correlation between 051905 and Dong-A is -0.19. 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 Steel. 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 Steel go up and down completely randomly.
Pair Corralation between LG Household and Dong-A Steel
Assuming the 90 days trading horizon LG Household Healthcare is expected to generate 0.39 times more return on investment than Dong-A Steel. However, LG Household Healthcare is 2.53 times less risky than Dong-A Steel. It trades about -0.06 of its potential returns per unit of risk. Dong A Steel Technology is currently generating about -0.14 per unit of risk. If you would invest 14,270,000 in LG Household Healthcare on September 12, 2024 and sell it today you would lose (380,000) from holding LG Household Healthcare or give up 2.66% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
LG Household Healthcare vs. Dong A Steel Technology
Performance |
| Timeline |
| LG Household Healthcare |
| Dong A Steel |
LG Household and Dong-A Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LG Household and Dong-A Steel
The main advantage of trading using opposite LG Household and Dong-A Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LG Household position performs unexpectedly, Dong-A Steel 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 Steel will offset losses from the drop in Dong-A Steel's long position.| LG Household vs. LG Household Healthcare | LG Household vs. Amorepacific Corp | LG Household vs. Jayjun Co | LG Household vs. CKH Food Health |
| Dong-A Steel vs. Samsung Electronics Co | Dong-A Steel vs. Samsung Electronics Co | Dong-A Steel vs. SK Hynix | Dong-A Steel vs. POSCO Holdings |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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