Correlation Between DC Media and LG Household
Can any of the company-specific risk be diversified away by investing in both DC Media 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 DC Media and LG Household into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between DC Media Co and LG Household Healthcare, you can compare the effects of market volatilities on DC Media 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 DC Media with a short position of LG Household. Check out your portfolio center. Please also check ongoing floating volatility patterns of DC Media and LG Household.
Diversification Opportunities for DC Media and LG Household
-0.06 | Correlation Coefficient |
Good diversification
The 3 months correlation between 263720 and 051900 is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding DC Media Co 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 DC Media 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 DC Media Co 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 DC Media i.e., DC Media and LG Household go up and down completely randomly.
Pair Corralation between DC Media and LG Household
Assuming the 90 days trading horizon DC Media Co is expected to generate 1.65 times more return on investment than LG Household. However, DC Media is 1.65 times more volatile than LG Household Healthcare. It trades about 0.01 of its potential returns per unit of risk. LG Household Healthcare is currently generating about -0.04 per unit of risk. If you would invest 2,045,000 in DC Media Co on November 27, 2024 and sell it today you would lose (220,000) from holding DC Media Co or give up 10.76% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
DC Media Co vs. LG Household Healthcare
Performance |
| Timeline |
| DC Media |
| LG Household Healthcare |
DC Media and LG Household Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with DC Media and LG Household
The main advantage of trading using opposite DC Media and LG Household positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DC Media 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.| DC Media vs. Taegu Broadcasting | DC Media vs. Hana Materials | DC Media vs. DB Insurance Co | DC Media vs. Dongbu Insurance Co |
| LG Household vs. SK Telecom Co | LG Household vs. LG Household Healthcare | LG Household vs. Kukil Metal Co | LG Household vs. KT Submarine Telecom |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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