Correlation Between LG Household and Amogreentech
Can any of the company-specific risk be diversified away by investing in both LG Household and Amogreentech 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 Amogreentech 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 Amogreentech Co, you can compare the effects of market volatilities on LG Household and Amogreentech 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 Amogreentech. Check out your portfolio center. Please also check ongoing floating volatility patterns of LG Household and Amogreentech.
Diversification Opportunities for LG Household and Amogreentech
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between 051905 and Amogreentech is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding LG Household Healthcare and Amogreentech Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amogreentech 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 Amogreentech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amogreentech has no effect on the direction of LG Household i.e., LG Household and Amogreentech go up and down completely randomly.
Pair Corralation between LG Household and Amogreentech
Assuming the 90 days trading horizon LG Household Healthcare is expected to generate 0.35 times more return on investment than Amogreentech. However, LG Household Healthcare is 2.87 times less risky than Amogreentech. It trades about -0.08 of its potential returns per unit of risk. Amogreentech Co is currently generating about -0.11 per unit of risk. If you would invest 14,270,000 in LG Household Healthcare on October 11, 2024 and sell it today you would lose (690,000) from holding LG Household Healthcare or give up 4.84% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
LG Household Healthcare vs. Amogreentech Co
Performance |
| Timeline |
| LG Household Healthcare |
| Amogreentech |
LG Household and Amogreentech Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LG Household and Amogreentech
The main advantage of trading using opposite LG Household and Amogreentech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LG Household position performs unexpectedly, Amogreentech 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 Amogreentech will offset losses from the drop in Amogreentech's long position.| LG Household vs. J Steel Co | LG Household vs. Samyoung Electronics Co | LG Household vs. Finebesteel | LG Household vs. Sungmoon Electronics Co |
| Amogreentech vs. Hyundai Engineering Plastics | Amogreentech vs. ABOV Semiconductor Co | Amogreentech vs. LG Household Healthcare | Amogreentech vs. Samick Musical Instruments |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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