Correlation Between LG Household and PH Tech

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Can any of the company-specific risk be diversified away by investing in both LG Household and PH Tech 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 PH Tech 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 PH Tech Co, you can compare the effects of market volatilities on LG Household and PH Tech 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 PH Tech. Check out your portfolio center. Please also check ongoing floating volatility patterns of LG Household and PH Tech.

Diversification Opportunities for LG Household and PH Tech

051905239890Diversified Away051905239890Diversified Away100%
-0.35
  Correlation Coefficient

Very good diversification

The 3 months correlation between 051905 and 239890 is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding LG Household Healthcare and PH Tech Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PH Tech 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 PH Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PH Tech has no effect on the direction of LG Household i.e., LG Household and PH Tech go up and down completely randomly.

Pair Corralation between LG Household and PH Tech

Assuming the 90 days trading horizon LG Household Healthcare is expected to generate 0.47 times more return on investment than PH Tech. However, LG Household Healthcare is 2.11 times less risky than PH Tech. It trades about -0.07 of its potential returns per unit of risk. PH Tech Co is currently generating about -0.09 per unit of risk. If you would invest  16,760,000  in LG Household Healthcare on November 21, 2024 and sell it today you would lose (4,390,000) from holding LG Household Healthcare or give up 26.19% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

LG Household Healthcare  vs.  PH Tech Co

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb -15-10-505101520
JavaScript chart by amCharts 3.21.15051905 239890
       Timeline  
LG Household Healthcare 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days LG Household Healthcare has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb120,000125,000130,000135,000140,000145,000150,000
PH Tech 

Risk-Adjusted Performance

Modest

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in PH Tech Co are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, PH Tech may actually be approaching a critical reversion point that can send shares even higher in March 2025.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb6,5007,0007,5008,0008,5009,000

LG Household and PH Tech Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-2.42-1.87-1.32-0.77-0.220.290.841.391.942.49 0.050.100.150.20
JavaScript chart by amCharts 3.21.15051905 239890
       Returns  

Pair Trading with LG Household and PH Tech

The main advantage of trading using opposite LG Household and PH Tech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LG Household position performs unexpectedly, PH Tech 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 PH Tech will offset losses from the drop in PH Tech's long position.
The idea behind LG Household Healthcare and PH Tech Co pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.

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