Correlation Between System and LG Household
Can any of the company-specific risk be diversified away by investing in both System and LG Household 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 System and LG Household into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between System and Application and LG Household Healthcare, you can compare the effects of market volatilities on System and LG Household 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 System with a short position of LG Household. Check out your portfolio center. Please also check ongoing floating volatility patterns of System and LG Household.
Diversification Opportunities for System and LG Household
-0.54 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between System and 051905 is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding System and Application and LG Household Healthcare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LG Household Healthcare and System 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 System and Application are associated (or correlated) with LG Household. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LG Household Healthcare has no effect on the direction of System i.e., System and LG Household go up and down completely randomly.
Pair Corralation between System and LG Household
Assuming the 90 days trading horizon System and Application is expected to generate 2.4 times more return on investment than LG Household. However, System is 2.4 times more volatile than LG Household Healthcare. It trades about -0.07 of its potential returns per unit of risk. LG Household Healthcare is currently generating about -0.27 per unit of risk. If you would invest 157,100 in System and Application on November 5, 2024 and sell it today you would lose (5,800) from holding System and Application or give up 3.69% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
System and Application vs. LG Household Healthcare
Performance |
| Timeline |
| System and Application |
| LG Household Healthcare |
System and LG Household Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with System and LG Household
The main advantage of trading using opposite System and LG Household positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if System position performs unexpectedly, LG Household 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 LG Household will offset losses from the drop in LG Household's long position.| System vs. Samsung Publishing Co | System vs. Mobile Appliance | System vs. Seah Steel Corp | System vs. Husteel |
| LG Household vs. Daeduck Electronics Co | LG Household vs. Ssangyong Information Communication | LG Household vs. Korea Electronic Certification | LG Household vs. Nice Information Telecommunication |
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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