Correlation Between LG Household and Mobile Appliance
Can any of the company-specific risk be diversified away by investing in both LG Household and Mobile Appliance 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 Mobile Appliance 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 Mobile Appliance, you can compare the effects of market volatilities on LG Household and Mobile Appliance 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 Mobile Appliance. Check out your portfolio center. Please also check ongoing floating volatility patterns of LG Household and Mobile Appliance.
Diversification Opportunities for LG Household and Mobile Appliance
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between 051905 and Mobile is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding LG Household Healthcare and Mobile Appliance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mobile Appliance 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 Mobile Appliance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mobile Appliance has no effect on the direction of LG Household i.e., LG Household and Mobile Appliance go up and down completely randomly.
Pair Corralation between LG Household and Mobile Appliance
Assuming the 90 days trading horizon LG Household Healthcare is expected to generate 0.59 times more return on investment than Mobile Appliance. However, LG Household Healthcare is 1.69 times less risky than Mobile Appliance. It trades about -0.01 of its potential returns per unit of risk. Mobile Appliance is currently generating about -0.03 per unit of risk. If you would invest 15,180,000 in LG Household Healthcare on September 14, 2024 and sell it today you would lose (1,110,000) from holding LG Household Healthcare or give up 7.31% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.62% |
| Values | Daily Returns |
LG Household Healthcare vs. Mobile Appliance
Performance |
| Timeline |
| LG Household Healthcare |
| Mobile Appliance |
LG Household and Mobile Appliance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LG Household and Mobile Appliance
The main advantage of trading using opposite LG Household and Mobile Appliance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LG Household position performs unexpectedly, Mobile Appliance 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 Mobile Appliance will offset losses from the drop in Mobile Appliance'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 |
| Mobile Appliance vs. Samsung Electronics Co | Mobile Appliance vs. Samsung Electronics Co | Mobile Appliance vs. LG Energy Solution | Mobile Appliance vs. SK Hynix |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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