Correlation Between LG Household and Hanjoo Light
Can any of the company-specific risk be diversified away by investing in both LG Household and Hanjoo Light 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 Hanjoo Light 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 Hanjoo Light Metal, you can compare the effects of market volatilities on LG Household and Hanjoo Light 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 Hanjoo Light. Check out your portfolio center. Please also check ongoing floating volatility patterns of LG Household and Hanjoo Light.
Diversification Opportunities for LG Household and Hanjoo Light
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between 051905 and Hanjoo is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding LG Household Healthcare and Hanjoo Light Metal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hanjoo Light Metal 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 Hanjoo Light. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hanjoo Light Metal has no effect on the direction of LG Household i.e., LG Household and Hanjoo Light go up and down completely randomly.
Pair Corralation between LG Household and Hanjoo Light
Assuming the 90 days trading horizon LG Household Healthcare is expected to generate 0.8 times more return on investment than Hanjoo Light. However, LG Household Healthcare is 1.25 times less risky than Hanjoo Light. It trades about -0.04 of its potential returns per unit of risk. Hanjoo Light Metal is currently generating about -0.3 per unit of risk. If you would invest 14,970,000 in LG Household Healthcare on August 26, 2024 and sell it today you would lose (270,000) from holding LG Household Healthcare or give up 1.8% 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. Hanjoo Light Metal
Performance |
| Timeline |
| LG Household Healthcare |
| Hanjoo Light Metal |
LG Household and Hanjoo Light Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LG Household and Hanjoo Light
The main advantage of trading using opposite LG Household and Hanjoo Light positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LG Household position performs unexpectedly, Hanjoo Light 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 Hanjoo Light will offset losses from the drop in Hanjoo Light's long position.| LG Household vs. Nice Information Telecommunication | LG Household vs. Iljin Display | LG Household vs. DB Insurance Co | LG Household vs. ZUM Internet Corp |
| Hanjoo Light vs. Sempio Foods Co | Hanjoo Light vs. Organic Special Pet | Hanjoo Light vs. Samlip General Foods | Hanjoo Light vs. Samyang Foods Co |
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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