Correlation Between LG Household and Miwon Chemical
Can any of the company-specific risk be diversified away by investing in both LG Household and Miwon Chemical 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 Miwon Chemical 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 Miwon Chemical, you can compare the effects of market volatilities on LG Household and Miwon Chemical 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 Miwon Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of LG Household and Miwon Chemical.
Diversification Opportunities for LG Household and Miwon Chemical
0.34 | Correlation Coefficient |
Weak diversification
The 3 months correlation between 051905 and Miwon is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding LG Household Healthcare and Miwon Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Miwon Chemical 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 Miwon Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Miwon Chemical has no effect on the direction of LG Household i.e., LG Household and Miwon Chemical go up and down completely randomly.
Pair Corralation between LG Household and Miwon Chemical
Assuming the 90 days trading horizon LG Household Healthcare is expected to under-perform the Miwon Chemical. But the stock apears to be less risky and, when comparing its historical volatility, LG Household Healthcare is 1.23 times less risky than Miwon Chemical. The stock trades about -0.48 of its potential returns per unit of risk. The Miwon Chemical is currently generating about -0.13 of returns per unit of risk over similar time horizon. If you would invest 7,950,000 in Miwon Chemical on October 25, 2024 and sell it today you would lose (200,000) from holding Miwon Chemical or give up 2.52% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
LG Household Healthcare vs. Miwon Chemical
Performance |
| Timeline |
| LG Household Healthcare |
| Miwon Chemical |
LG Household and Miwon Chemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LG Household and Miwon Chemical
The main advantage of trading using opposite LG Household and Miwon Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LG Household position performs unexpectedly, Miwon Chemical 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 Miwon Chemical will offset losses from the drop in Miwon Chemical's long position.| LG Household vs. Kbi Metal Co | LG Household vs. Myoung Shin Industrial | LG Household vs. Songwon Industrial Co | LG Household vs. Sejong Telecom |
| Miwon Chemical vs. FOODWELL Co | Miwon Chemical vs. INFINITT Healthcare Co | Miwon Chemical vs. LG Household Healthcare | Miwon Chemical vs. Sajo Seafood |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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