Correlation Between Alton Sports and LG Household
Can any of the company-specific risk be diversified away by investing in both Alton Sports 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 Alton Sports and LG Household into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alton Sports CoLtd and LG Household Healthcare, you can compare the effects of market volatilities on Alton Sports 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 Alton Sports with a short position of LG Household. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alton Sports and LG Household.
Diversification Opportunities for Alton Sports and LG Household
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Alton and 051905 is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Alton Sports 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 Alton Sports 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 Alton Sports 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 Alton Sports i.e., Alton Sports and LG Household go up and down completely randomly.
Pair Corralation between Alton Sports and LG Household
Assuming the 90 days trading horizon Alton Sports CoLtd is expected to under-perform the LG Household. But the stock apears to be less risky and, when comparing its historical volatility, Alton Sports CoLtd is 1.13 times less risky than LG Household. The stock trades about -0.35 of its potential returns per unit of risk. The LG Household Healthcare is currently generating about -0.1 of returns per unit of risk over similar time horizon. If you would invest 14,550,000 in LG Household Healthcare on September 4, 2024 and sell it today you would lose (560,000) from holding LG Household Healthcare or give up 3.85% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Alton Sports CoLtd vs. LG Household Healthcare
Performance |
| Timeline |
| Alton Sports CoLtd |
| LG Household Healthcare |
Alton Sports and LG Household Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alton Sports and LG Household
The main advantage of trading using opposite Alton Sports and LG Household positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alton Sports 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.| Alton Sports vs. Korea Real Estate | Alton Sports vs. Busan Industrial Co | Alton Sports vs. UNISEM Co | Alton Sports vs. RPBio Inc |
| LG Household vs. LG Household Healthcare | LG Household vs. Amorepacific Corp | LG Household vs. Mirae Asset No2 | LG Household vs. Aekyung Industrial 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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