Correlation Between LG Household and Dgb Financial
Can any of the company-specific risk be diversified away by investing in both LG Household and Dgb Financial 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 Dgb Financial 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 Dgb Financial, you can compare the effects of market volatilities on LG Household and Dgb Financial 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 Dgb Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of LG Household and Dgb Financial.
Diversification Opportunities for LG Household and Dgb Financial
-0.58 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between 051905 and Dgb is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding LG Household Healthcare and Dgb Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dgb Financial 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 Dgb Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dgb Financial has no effect on the direction of LG Household i.e., LG Household and Dgb Financial go up and down completely randomly.
Pair Corralation between LG Household and Dgb Financial
Assuming the 90 days trading horizon LG Household Healthcare is expected to under-perform the Dgb Financial. But the stock apears to be less risky and, when comparing its historical volatility, LG Household Healthcare is 2.09 times less risky than Dgb Financial. The stock trades about -0.31 of its potential returns per unit of risk. The Dgb Financial is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 887,000 in Dgb Financial on October 30, 2024 and sell it today you would earn a total of 25,000 from holding Dgb Financial or generate 2.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
LG Household Healthcare vs. Dgb Financial
Performance |
| Timeline |
| LG Household Healthcare |
| Dgb Financial |
LG Household and Dgb Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LG Household and Dgb Financial
The main advantage of trading using opposite LG Household and Dgb Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LG Household position performs unexpectedly, Dgb Financial 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 Dgb Financial will offset losses from the drop in Dgb Financial's long position.| LG Household vs. Dongnam Chemical Co | LG Household vs. KPX Green Chemical | LG Household vs. Seoul Semiconductor Co | LG Household vs. Homecast CoLtd |
| Dgb Financial vs. Ssangyong Materials Corp | Dgb Financial vs. Top Material Co | Dgb Financial vs. PI Advanced Materials | Dgb Financial vs. Inzi Display CoLtd |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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