Correlation Between LG Household and OptiPharm
Can any of the company-specific risk be diversified away by investing in both LG Household and OptiPharm 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 OptiPharm 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 OptiPharm Co, you can compare the effects of market volatilities on LG Household and OptiPharm 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 OptiPharm. Check out your portfolio center. Please also check ongoing floating volatility patterns of LG Household and OptiPharm.
Diversification Opportunities for LG Household and OptiPharm
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between 051905 and OptiPharm is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding LG Household Healthcare and OptiPharm Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OptiPharm 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 OptiPharm. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of OptiPharm has no effect on the direction of LG Household i.e., LG Household and OptiPharm go up and down completely randomly.
Pair Corralation between LG Household and OptiPharm
Assuming the 90 days trading horizon LG Household is expected to generate 6.9 times less return on investment than OptiPharm. In addition to that, LG Household is 1.32 times more volatile than OptiPharm Co. It trades about 0.02 of its total potential returns per unit of risk. OptiPharm Co is currently generating about 0.14 per unit of volatility. If you would invest 464,000 in OptiPharm Co on September 15, 2024 and sell it today you would earn a total of 18,000 from holding OptiPharm Co or generate 3.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
LG Household Healthcare vs. OptiPharm Co
Performance |
| Timeline |
| LG Household Healthcare |
| OptiPharm |
LG Household and OptiPharm Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LG Household and OptiPharm
The main advantage of trading using opposite LG Household and OptiPharm positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LG Household position performs unexpectedly, OptiPharm 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 OptiPharm will offset losses from the drop in OptiPharm'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 |
| OptiPharm vs. Seoul Broadcasting System | OptiPharm vs. INFINITT Healthcare Co | OptiPharm vs. DB Financial Investment | OptiPharm vs. LG Household Healthcare |
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 Stocks Directory module to find actively traded stocks across global markets.
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