Correlation Between LG Household and Hyosung Heavy
Can any of the company-specific risk be diversified away by investing in both LG Household and Hyosung Heavy 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 Hyosung Heavy 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 Hyosung Heavy Industries, you can compare the effects of market volatilities on LG Household and Hyosung Heavy 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 Hyosung Heavy. Check out your portfolio center. Please also check ongoing floating volatility patterns of LG Household and Hyosung Heavy.
Diversification Opportunities for LG Household and Hyosung Heavy
-0.72 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between 051905 and Hyosung is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding LG Household Healthcare and Hyosung Heavy Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hyosung Heavy Industries 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 Hyosung Heavy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hyosung Heavy Industries has no effect on the direction of LG Household i.e., LG Household and Hyosung Heavy go up and down completely randomly.
Pair Corralation between LG Household and Hyosung Heavy
Assuming the 90 days trading horizon LG Household Healthcare is expected to under-perform the Hyosung Heavy. But the stock apears to be less risky and, when comparing its historical volatility, LG Household Healthcare is 3.0 times less risky than Hyosung Heavy. The stock trades about -0.06 of its potential returns per unit of risk. The Hyosung Heavy Industries is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 44,850,000 in Hyosung Heavy Industries on November 27, 2024 and sell it today you would earn a total of 1,000,000 from holding Hyosung Heavy Industries or generate 2.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
LG Household Healthcare vs. Hyosung Heavy Industries
Performance |
| Timeline |
| LG Household Healthcare |
| Hyosung Heavy Industries |
LG Household and Hyosung Heavy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LG Household and Hyosung Heavy
The main advantage of trading using opposite LG Household and Hyosung Heavy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LG Household position performs unexpectedly, Hyosung Heavy 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 Hyosung Heavy will offset losses from the drop in Hyosung Heavy's long position.| LG Household vs. TK Chemical | LG Household vs. FNC Entertainment Co | LG Household vs. Digital Multimedia Technology | LG Household vs. SM Entertainment Co |
| Hyosung Heavy vs. Miwon Chemicals Co | Hyosung Heavy vs. Lotte Rental Co | Hyosung Heavy vs. JYP Entertainment Corp | Hyosung Heavy vs. SK Chemicals 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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