Correlation Between Mirae Asset and LG Household
Can any of the company-specific risk be diversified away by investing in both Mirae Asset 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 Mirae Asset and LG Household into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mirae Asset No2 and LG Household Healthcare, you can compare the effects of market volatilities on Mirae Asset 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 Mirae Asset with a short position of LG Household. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mirae Asset and LG Household.
Diversification Opportunities for Mirae Asset and LG Household
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Mirae and 051905 is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Mirae Asset No2 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 Mirae Asset 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 Mirae Asset No2 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 Mirae Asset i.e., Mirae Asset and LG Household go up and down completely randomly.
Pair Corralation between Mirae Asset and LG Household
Assuming the 90 days trading horizon Mirae Asset No2 is expected to generate 1.08 times more return on investment than LG Household. However, Mirae Asset is 1.08 times more volatile than LG Household Healthcare. It trades about -0.05 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 2,478,377 in Mirae Asset No2 on August 28, 2024 and sell it today you would lose (1,196,377) from holding Mirae Asset No2 or give up 48.27% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Mirae Asset No2 vs. LG Household Healthcare
Performance |
| Timeline |
| Mirae Asset No2 |
| LG Household Healthcare |
Mirae Asset and LG Household Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mirae Asset and LG Household
The main advantage of trading using opposite Mirae Asset and LG Household positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mirae Asset 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.The idea behind Mirae Asset No2 and LG Household Healthcare pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| LG Household vs. Jeil Steel Mfg | LG Household vs. Dongbu Steel Co | LG Household vs. Cuckoo Homesys Co | LG Household vs. Daejung Chemicals Metals |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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