Correlation Between LG Uplus and Pyung Hwa

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

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

Diversification Opportunities for LG Uplus and Pyung Hwa

0.03

Correlation Coefficient

LG Uplus  Pyung Hwa

Significant diversification

The 3 months correlation between 032640 and Pyung is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding LG Uplus and Pyung Hwa Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pyung Hwa Industrial and LG Uplus 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 Uplus are associated (or correlated) with Pyung Hwa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pyung Hwa Industrial has no effect on the direction of LG Uplus i.e., LG Uplus and Pyung Hwa go up and down completely randomly.

Pair Corralation between LG Uplus and Pyung Hwa

Assuming the 90 days trading horizon LG Uplus is expected to generate 0.28 times more return on investment than Pyung Hwa. However, LG Uplus is 3.63 times less risky than Pyung Hwa. It trades about 0.06 of its potential returns per unit of risk. Pyung Hwa Industrial is currently generating about -0.36 per unit of risk. If you would invest  1,026,224  in LG Uplus on December 29, 2024 and sell it today you would earn a total of  10,776  from holding LG Uplus or generate 1.05% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

LG Uplus  vs.  Pyung Hwa Industrial

LG Uplus

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in LG Uplus are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, LG Uplus is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pyung Hwa Industrial

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Pyung Hwa Industrial are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Pyung Hwa sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with LG Uplus and Pyung Hwa

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

The idea behind LG Uplus and Pyung Hwa Industrial 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.