Correlation Between LIG ES and Nam Hwa
Can any of the company-specific risk be diversified away by investing in both LIG ES and Nam Hwa 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 LIG ES and Nam Hwa into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LIG ES SPAC and Nam Hwa Construction, you can compare the effects of market volatilities on LIG ES and Nam Hwa 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 LIG ES with a short position of Nam Hwa. Check out your portfolio center. Please also check ongoing floating volatility patterns of LIG ES and Nam Hwa.
Diversification Opportunities for LIG ES and Nam Hwa
Good diversification
The 3 months correlation between LIG and Nam is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding LIG ES SPAC and Nam Hwa Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nam Hwa Construction and LIG ES 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 LIG ES SPAC are associated (or correlated) with Nam Hwa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nam Hwa Construction has no effect on the direction of LIG ES i.e., LIG ES and Nam Hwa go up and down completely randomly.
Pair Corralation between LIG ES and Nam Hwa
Assuming the 90 days trading horizon LIG ES SPAC is expected to generate 1.69 times more return on investment than Nam Hwa. However, LIG ES is 1.69 times more volatile than Nam Hwa Construction. It trades about -0.05 of its potential returns per unit of risk. Nam Hwa Construction is currently generating about -0.12 per unit of risk. If you would invest 585,000 in LIG ES SPAC on September 4, 2024 and sell it today you would lose (237,000) from holding LIG ES SPAC or give up 40.51% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
LIG ES SPAC vs. Nam Hwa Construction
Performance |
| Timeline |
| LIG ES SPAC |
| Nam Hwa Construction |
LIG ES and Nam Hwa Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LIG ES and Nam Hwa
The main advantage of trading using opposite LIG ES and Nam Hwa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LIG ES position performs unexpectedly, Nam Hwa 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 Nam Hwa will offset losses from the drop in Nam Hwa's long position.| LIG ES vs. Display Tech Co | LIG ES vs. CG Hi Tech | LIG ES vs. Daesung Hi Tech Co | LIG ES vs. Lotte Data Communication |
| Nam Hwa vs. LG Display | Nam Hwa vs. Hyundai Motor | Nam Hwa vs. Hyundai Motor Co | Nam Hwa vs. Hyundai Motor 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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