Correlation Between Hyundai Heavy and LG Household
Can any of the company-specific risk be diversified away by investing in both Hyundai Heavy 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 Hyundai Heavy and LG Household into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hyundai Heavy Industries and LG Household Healthcare, you can compare the effects of market volatilities on Hyundai Heavy 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 Hyundai Heavy with a short position of LG Household. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hyundai Heavy and LG Household.
Diversification Opportunities for Hyundai Heavy and LG Household
-0.63 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Hyundai and 051905 is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Hyundai Heavy Industries 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 Hyundai Heavy 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 Hyundai Heavy Industries 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 Hyundai Heavy i.e., Hyundai Heavy and LG Household go up and down completely randomly.
Pair Corralation between Hyundai Heavy and LG Household
Assuming the 90 days trading horizon Hyundai Heavy Industries is expected to generate 2.11 times more return on investment than LG Household. However, Hyundai Heavy is 2.11 times more volatile than LG Household Healthcare. It trades about 0.14 of its potential returns per unit of risk. LG Household Healthcare is currently generating about -0.09 per unit of risk. If you would invest 12,950,000 in Hyundai Heavy Industries on September 2, 2024 and sell it today you would earn a total of 9,050,000 from holding Hyundai Heavy Industries or generate 69.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hyundai Heavy Industries vs. LG Household Healthcare
Performance |
| Timeline |
| Hyundai Heavy Industries |
| LG Household Healthcare |
Hyundai Heavy and LG Household Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hyundai Heavy and LG Household
The main advantage of trading using opposite Hyundai Heavy and LG Household positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hyundai Heavy 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.| Hyundai Heavy vs. Daehan Steel | Hyundai Heavy vs. Daechang Steel Co | Hyundai Heavy vs. Han Kook Steel | Hyundai Heavy vs. Daeduck Electronics Co |
| 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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