Correlation Between Shinsegae Information and LG Household

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

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

Diversification Opportunities for Shinsegae Information and LG Household

0.4

Correlation Coefficient

Shinsegae Information  LG Household

Very weak diversification

The 3 months correlation between Shinsegae and 051905 is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Shinsegae Information Communic 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 Shinsegae Information 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 Shinsegae Information Communication 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 Shinsegae Information i.e., Shinsegae Information and LG Household go up and down completely randomly.

Pair Corralation between Shinsegae Information and LG Household

Assuming the 90 days trading horizon Shinsegae Information Communication is expected to generate 0.99 times more return on investment than LG Household. However, Shinsegae Information Communication is 1.01 times less risky than LG Household. It trades about -0.01 of its potential returns per unit of risk. LG Household Healthcare is currently generating about -0.07 per unit of risk. If you would invest  1,295,565  in Shinsegae Information Communication on September 24, 2024 and sell it today you would lose (215,565) from holding Shinsegae Information Communication or give up 16.64% of portfolio value over 90 days.

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

Shinsegae Information Communic  vs.  LG Household Healthcare

Shinsegae Information

Risk-Adjusted Performance

6 of 100

Modest

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

LG Household Healthcare

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LG Household Healthcare has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Shinsegae Information and LG Household

The main advantage of trading using opposite Shinsegae Information and LG Household positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shinsegae Information 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 Shinsegae Information Communication 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.