Correlation Between ENERGYMACHINERY KOREA and LG Household
Can any of the company-specific risk be diversified away by investing in both ENERGYMACHINERY KOREA 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 ENERGYMACHINERY KOREA and LG Household into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ENERGYMACHINERY KOREA CoLtd and LG Household Healthcare, you can compare the effects of market volatilities on ENERGYMACHINERY KOREA 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 ENERGYMACHINERY KOREA with a short position of LG Household. Check out your portfolio center. Please also check ongoing floating volatility patterns of ENERGYMACHINERY KOREA and LG Household.
Diversification Opportunities for ENERGYMACHINERY KOREA and LG Household
-0.37 | Correlation Coefficient |
Very good diversification
The 3 months correlation between ENERGYMACHINERY and 051900 is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding ENERGYMACHINERY KOREA CoLtd 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 ENERGYMACHINERY KOREA 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 ENERGYMACHINERY KOREA CoLtd 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 ENERGYMACHINERY KOREA i.e., ENERGYMACHINERY KOREA and LG Household go up and down completely randomly.
Pair Corralation between ENERGYMACHINERY KOREA and LG Household
Assuming the 90 days trading horizon ENERGYMACHINERY KOREA CoLtd is expected to generate 1.12 times more return on investment than LG Household. However, ENERGYMACHINERY KOREA is 1.12 times more volatile than LG Household Healthcare. It trades about -0.01 of its potential returns per unit of risk. LG Household Healthcare is currently generating about -0.06 per unit of risk. If you would invest 317,000 in ENERGYMACHINERY KOREA CoLtd on October 26, 2024 and sell it today you would lose (88,500) from holding ENERGYMACHINERY KOREA CoLtd or give up 27.92% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ENERGYMACHINERY KOREA CoLtd vs. LG Household Healthcare
Performance |
| Timeline |
| ENERGYMACHINERY KOREA |
| LG Household Healthcare |
ENERGYMACHINERY KOREA and LG Household Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ENERGYMACHINERY KOREA and LG Household
The main advantage of trading using opposite ENERGYMACHINERY KOREA and LG Household positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ENERGYMACHINERY KOREA 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.| ENERGYMACHINERY KOREA vs. Aprogen Healthcare Games | ENERGYMACHINERY KOREA vs. Narae Nanotech Corp | ENERGYMACHINERY KOREA vs. Nable Communications | ENERGYMACHINERY KOREA vs. Yura Tech Co |
| LG Household vs. Busan Industrial Co | LG Household vs. Busan Ind | LG Household vs. RPBio Inc | LG Household vs. Finebesteel |
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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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