Correlation Between Miwon Chemical and LG Household
Can any of the company-specific risk be diversified away by investing in both Miwon Chemical 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 Miwon Chemical and LG Household into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Miwon Chemical and LG Household Healthcare, you can compare the effects of market volatilities on Miwon Chemical 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 Miwon Chemical with a short position of LG Household. Check out your portfolio center. Please also check ongoing floating volatility patterns of Miwon Chemical and LG Household.
Diversification Opportunities for Miwon Chemical and LG Household
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Miwon and 051900 is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Miwon Chemical 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 Miwon Chemical 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 Miwon Chemical 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 Miwon Chemical i.e., Miwon Chemical and LG Household go up and down completely randomly.
Pair Corralation between Miwon Chemical and LG Household
Assuming the 90 days trading horizon Miwon Chemical is expected to generate 0.55 times more return on investment than LG Household. However, Miwon Chemical is 1.83 times less risky than LG Household. It trades about -0.06 of its potential returns per unit of risk. LG Household Healthcare is currently generating about -0.07 per unit of risk. If you would invest 7,860,000 in Miwon Chemical on November 4, 2024 and sell it today you would lose (60,000) from holding Miwon Chemical or give up 0.76% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Miwon Chemical vs. LG Household Healthcare
Performance |
| Timeline |
| Miwon Chemical |
| LG Household Healthcare |
Miwon Chemical and LG Household Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Miwon Chemical and LG Household
The main advantage of trading using opposite Miwon Chemical and LG Household positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Miwon Chemical 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.| Miwon Chemical vs. Youngchang Chemical Co | Miwon Chemical vs. Hanwha Chemical Corp | Miwon Chemical vs. Kukdong Oil Chemicals | Miwon Chemical vs. Narae Nanotech Corp |
| LG Household vs. Samyang Foods Co | LG Household vs. KTB Investment Securities | LG Household vs. FOODWELL Co | LG Household vs. Haitai Confectionery Foods |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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