Correlation Between Seoulin Bioscience and LG Household

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

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

Diversification Opportunities for Seoulin Bioscience and LG Household

0.6

Correlation Coefficient

Seoulin Bioscience  LG Household

Poor diversification

The 3 months correlation between Seoulin and 051905 is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Seoulin Bioscience CoLtd 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 Seoulin Bioscience 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 Seoulin Bioscience CoLtd 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 Seoulin Bioscience i.e., Seoulin Bioscience and LG Household go up and down completely randomly.

Pair Corralation between Seoulin Bioscience and LG Household

Assuming the 90 days trading horizon Seoulin Bioscience CoLtd is expected to generate 1.39 times more return on investment than LG Household. However, Seoulin Bioscience is 1.39 times more volatile than LG Household Healthcare. It trades about -0.05 of its potential returns per unit of risk. LG Household Healthcare is currently generating about -0.1 per unit of risk. If you would invest  696,490  in Seoulin Bioscience CoLtd on December 25, 2024 and sell it today you would lose (35,490) from holding Seoulin Bioscience CoLtd or give up 5.1% of portfolio value over 90 days.

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

Seoulin Bioscience CoLtd  vs.  LG Household Healthcare

Seoulin Bioscience CoLtd

Risk-Adjusted Performance

Very Weak

Over the last 90 days Seoulin Bioscience CoLtd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Seoulin Bioscience 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

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 Seoulin Bioscience and LG Household

The main advantage of trading using opposite Seoulin Bioscience and LG Household positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Seoulin Bioscience 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 Seoulin Bioscience CoLtd 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.