Correlation Between LG Household and Samlip General

Can any of the company-specific risk be diversified away by investing in both LG Household and Samlip General 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 Samlip General 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 Samlip General Foods, you can compare the effects of market volatilities on LG Household and Samlip General 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 Samlip General. Check out your portfolio center. Please also check ongoing floating volatility patterns of LG Household and Samlip General.

Diversification Opportunities for LG Household and Samlip General

0.06

Correlation Coefficient

LG Household  Samlip General

Significant diversification

The 3 months correlation between 051905 and Samlip is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding LG Household Healthcare and Samlip General Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Samlip General Foods 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 Samlip General. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Samlip General Foods has no effect on the direction of LG Household i.e., LG Household and Samlip General go up and down completely randomly.

Pair Corralation between LG Household and Samlip General

Assuming the 90 days trading horizon LG Household Healthcare is expected to under-perform the Samlip General. But the stock apears to be less risky and, when comparing its historical volatility, LG Household Healthcare is 3.01 times less risky than Samlip General. The stock trades about -0.06 of its potential returns per unit of risk. The Samlip General Foods is currently generating about 0.6 of returns per unit of risk over similar time horizon. If you would invest  4,370,214  in Samlip General Foods on October 10, 2024 and sell it today you would earn a total of  1,059,786  from holding Samlip General Foods or generate 24.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.0%
Values	Daily Returns

LG Household Healthcare  vs.  Samlip General Foods

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.

Samlip General Foods

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Samlip General Foods are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Samlip General may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with LG Household and Samlip General

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

The idea behind LG Household Healthcare and Samlip General Foods 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.