Correlation Between PI Advanced and LG Household
Can any of the company-specific risk be diversified away by investing in both PI Advanced 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 PI Advanced and LG Household into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PI Advanced Materials and LG Household Healthcare, you can compare the effects of market volatilities on PI Advanced 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 PI Advanced with a short position of LG Household. Check out your portfolio center. Please also check ongoing floating volatility patterns of PI Advanced and LG Household.
Diversification Opportunities for PI Advanced and LG Household
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between 178920 and 051905 is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding PI Advanced Materials 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 PI Advanced 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 PI Advanced Materials 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 PI Advanced i.e., PI Advanced and LG Household go up and down completely randomly.
Pair Corralation between PI Advanced and LG Household
Assuming the 90 days trading horizon PI Advanced Materials is expected to generate 1.48 times more return on investment than LG Household. However, PI Advanced is 1.48 times more volatile than LG Household Healthcare. It trades about -0.03 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 3,235,065 in PI Advanced Materials on September 1, 2024 and sell it today you would lose (1,594,065) from holding PI Advanced Materials or give up 49.27% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
PI Advanced Materials vs. LG Household Healthcare
Performance |
| Timeline |
| PI Advanced Materials |
| LG Household Healthcare |
PI Advanced and LG Household Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PI Advanced and LG Household
The main advantage of trading using opposite PI Advanced and LG Household positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PI Advanced 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.| PI Advanced vs. Samsung Electronics Co | PI Advanced vs. Samsung Electronics Co | PI Advanced vs. LG Energy Solution | PI Advanced vs. SK Hynix |
| LG Household vs. LG Household Healthcare | LG Household vs. Mirae Asset No2 | LG Household vs. CKH Food Health |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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