Correlation Between Samwon Steel and LG Household

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

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

Diversification Opportunities for Samwon Steel and LG Household

-0.62

Correlation Coefficient

Samwon Steel  LG Household

Excellent diversification

The 3 months correlation between Samwon and 051900 is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Samwon Steel 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 Samwon Steel 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 Samwon Steel 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 Samwon Steel i.e., Samwon Steel and LG Household go up and down completely randomly.

Pair Corralation between Samwon Steel and LG Household

Assuming the 90 days trading horizon Samwon Steel is expected to generate 2.17 times less return on investment than LG Household. But when comparing it to its historical volatility, Samwon Steel is 1.37 times less risky than LG Household. It trades about 0.03 of its potential returns per unit of risk. LG Household Healthcare is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  30,950,000  in LG Household Healthcare on December 26, 2024 and sell it today you would earn a total of  1,350,000  from holding LG Household Healthcare or generate 4.36% return on investment over 90 days.

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

Samwon Steel  vs.  LG Household Healthcare

Samwon Steel

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Samwon Steel are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Samwon Steel is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

LG Household Healthcare

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in LG Household Healthcare are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, LG Household is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Samwon Steel and LG Household

The main advantage of trading using opposite Samwon Steel and LG Household positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Samwon Steel 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.

The idea behind Samwon Steel and LG Household Healthcare 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.