Correlation Between LG Household and YeaRimDang Publishing

Can any of the company-specific risk be diversified away by investing in both LG Household and YeaRimDang Publishing 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 LG Household and YeaRimDang Publishing into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between LG Household Healthcare and YeaRimDang Publishing Co, you can compare the effects of market volatilities on LG Household and YeaRimDang Publishing 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 LG Household with a short position of YeaRimDang Publishing. Check out your portfolio center. Please also check ongoing floating volatility patterns of LG Household and YeaRimDang Publishing.

Diversification Opportunities for LG Household and YeaRimDang Publishing

0.73

Correlation Coefficient

LG Household  YeaRimDang Publishing

Poor diversification

The 3 months correlation between 051900 and YeaRimDang is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding LG Household Healthcare and YeaRimDang Publishing Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on YeaRimDang Publishing and LG Household 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 LG Household Healthcare are associated (or correlated) with YeaRimDang Publishing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of YeaRimDang Publishing has no effect on the direction of LG Household i.e., LG Household and YeaRimDang Publishing go up and down completely randomly.

Pair Corralation between LG Household and YeaRimDang Publishing

Assuming the 90 days trading horizon LG Household Healthcare is expected to generate 1.6 times more return on investment than YeaRimDang Publishing. However, LG Household is 1.6 times more volatile than YeaRimDang Publishing Co. It trades about 0.21 of its potential returns per unit of risk. YeaRimDang Publishing Co is currently generating about 0.09 per unit of risk. If you would invest  38,600,000  in LG Household Healthcare on February 3, 2024 and sell it today you would earn a total of  4,600,000  from holding LG Household Healthcare or generate 11.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

LG Household Healthcare  vs.  YeaRimDang Publishing Co

LG Household Healthcare

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in LG Household Healthcare are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, LG Household sustained solid returns over the last few months and may actually be approaching a breakup point.

YeaRimDang Publishing

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in YeaRimDang Publishing Co are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, YeaRimDang Publishing may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with LG Household and YeaRimDang Publishing

The main advantage of trading using opposite LG Household and YeaRimDang Publishing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LG Household position performs unexpectedly, YeaRimDang Publishing 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 YeaRimDang Publishing will offset losses from the drop in YeaRimDang Publishing's long position.

The idea behind LG Household Healthcare and YeaRimDang Publishing Co 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.

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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 Equity Valuation module to check real value of public entities based on technical and fundamental data.