Correlation Between LG Household and CKH Food
Can any of the company-specific risk be diversified away by investing in both LG Household and CKH Food 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 CKH Food 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 CKH Food Health, you can compare the effects of market volatilities on LG Household and CKH Food 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 CKH Food. Check out your portfolio center. Please also check ongoing floating volatility patterns of LG Household and CKH Food.
Diversification Opportunities for LG Household and CKH Food
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between 051905 and CKH is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding LG Household Healthcare and CKH Food Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CKH Food Health 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 CKH Food. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CKH Food Health has no effect on the direction of LG Household i.e., LG Household and CKH Food go up and down completely randomly.
Pair Corralation between LG Household and CKH Food
Assuming the 90 days trading horizon LG Household Healthcare is expected to generate 0.65 times more return on investment than CKH Food. However, LG Household Healthcare is 1.53 times less risky than CKH Food. It trades about -0.05 of its potential returns per unit of risk. CKH Food Health is currently generating about -0.05 per unit of risk. If you would invest 23,500,000 in LG Household Healthcare on August 31, 2024 and sell it today you would lose (9,500,000) from holding LG Household Healthcare or give up 40.43% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.72% |
| Values | Daily Returns |
LG Household Healthcare vs. CKH Food Health
Performance |
| Timeline |
| LG Household Healthcare |
| CKH Food Health |
LG Household and CKH Food Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LG Household and CKH Food
The main advantage of trading using opposite LG Household and CKH Food positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LG Household position performs unexpectedly, CKH Food 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 CKH Food will offset losses from the drop in CKH Food's long position.| LG Household vs. LG Household Healthcare | LG Household vs. Mirae Asset No2 | LG Household vs. CKH Food Health |
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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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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