Correlation Between KakaoBank Corp and LG Electronics
Can any of the company-specific risk be diversified away by investing in both KakaoBank Corp and LG Electronics 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 KakaoBank Corp and LG Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between KakaoBank Corp and LG Electronics, you can compare the effects of market volatilities on KakaoBank Corp and LG Electronics 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 KakaoBank Corp with a short position of LG Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of KakaoBank Corp and LG Electronics.
Diversification Opportunities for KakaoBank Corp and LG Electronics
-0.31 | Correlation Coefficient |
Very good diversification
The 3 months correlation between KakaoBank and 066570 is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding KakaoBank Corp and LG Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LG Electronics and KakaoBank Corp 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 KakaoBank Corp are associated (or correlated) with LG Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LG Electronics has no effect on the direction of KakaoBank Corp i.e., KakaoBank Corp and LG Electronics go up and down completely randomly.
Pair Corralation between KakaoBank Corp and LG Electronics
Assuming the 90 days trading horizon KakaoBank Corp is expected to generate 1.53 times more return on investment than LG Electronics. However, KakaoBank Corp is 1.53 times more volatile than LG Electronics. It trades about -0.03 of its potential returns per unit of risk. LG Electronics is currently generating about -0.16 per unit of risk. If you would invest 2,250,000 in KakaoBank Corp on September 28, 2024 and sell it today you would lose (70,000) from holding KakaoBank Corp or give up 3.11% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
KakaoBank Corp vs. LG Electronics
Performance |
| Timeline |
| KakaoBank Corp |
| LG Electronics |
KakaoBank Corp and LG Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with KakaoBank Corp and LG Electronics
The main advantage of trading using opposite KakaoBank Corp and LG Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KakaoBank Corp position performs unexpectedly, LG Electronics 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 Electronics will offset losses from the drop in LG Electronics' long position.| KakaoBank Corp vs. Shinhan Financial Group | KakaoBank Corp vs. Hana Financial | KakaoBank Corp vs. Woori Financial Group | KakaoBank Corp vs. Industrial Bank |
| LG Electronics vs. CJ Seafood Corp | LG Electronics vs. Haitai Confectionery Foods | LG Electronics vs. PlayD Co | LG Electronics vs. Playgram 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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