Correlation Between LG Household and LIG-ES SPAC
Can any of the company-specific risk be diversified away by investing in both LG Household and LIG-ES SPAC 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 LIG-ES SPAC 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 LIG ES SPAC, you can compare the effects of market volatilities on LG Household and LIG-ES SPAC 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 LIG-ES SPAC. Check out your portfolio center. Please also check ongoing floating volatility patterns of LG Household and LIG-ES SPAC.
Diversification Opportunities for LG Household and LIG-ES SPAC
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between 051900 and LIG-ES is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding LG Household Healthcare and LIG ES SPAC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LIG ES SPAC 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 LIG-ES SPAC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LIG ES SPAC has no effect on the direction of LG Household i.e., LG Household and LIG-ES SPAC go up and down completely randomly.
Pair Corralation between LG Household and LIG-ES SPAC
Assuming the 90 days trading horizon LG Household Healthcare is expected to generate 0.86 times more return on investment than LIG-ES SPAC. However, LG Household Healthcare is 1.17 times less risky than LIG-ES SPAC. It trades about -0.01 of its potential returns per unit of risk. LIG ES SPAC is currently generating about -0.22 per unit of risk. If you would invest 34,950,000 in LG Household Healthcare on September 15, 2024 and sell it today you would lose (1,200,000) from holding LG Household Healthcare or give up 3.43% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
LG Household Healthcare vs. LIG ES SPAC
Performance |
Timeline |
LG Household Healthcare |
LIG ES SPAC |
LG Household and LIG-ES SPAC Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with LG Household and LIG-ES SPAC
The main advantage of trading using opposite LG Household and LIG-ES SPAC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LG Household position performs unexpectedly, LIG-ES SPAC 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 LIG-ES SPAC will offset losses from the drop in LIG-ES SPAC's long position.LG Household vs. Korea New Network | LG Household vs. ICD Co | LG Household vs. DYPNF CoLtd | LG Household vs. Solution Advanced Technology |
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Check out your portfolio center.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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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