Correlation Between DYPNF CoLtd and LG Household

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

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

Diversification Opportunities for DYPNF CoLtd and LG Household

0.37

Correlation Coefficient

DYPNF CoLtd  LG Household

Weak diversification

The 3 months correlation between DYPNF and 051900 is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding DYPNF 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 DYPNF CoLtd 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 DYPNF 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 DYPNF CoLtd i.e., DYPNF CoLtd and LG Household go up and down completely randomly.

Pair Corralation between DYPNF CoLtd and LG Household

Assuming the 90 days trading horizon DYPNF CoLtd is expected to generate 1.49 times more return on investment than LG Household. However, DYPNF CoLtd is 1.49 times more volatile than LG Household Healthcare. It trades about 0.37 of its potential returns per unit of risk. LG Household Healthcare is currently generating about 0.14 per unit of risk. If you would invest  1,139,000  in DYPNF CoLtd on December 4, 2024 and sell it today you would earn a total of  310,000  from holding DYPNF CoLtd or generate 27.22% return on investment over 90 days.

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

DYPNF CoLtd  vs.  LG Household Healthcare

DYPNF CoLtd

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in DYPNF CoLtd are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, DYPNF CoLtd sustained solid returns over the last few months and may actually be approaching a breakup point.

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 somewhat strong basic indicators, LG Household is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with DYPNF CoLtd and LG Household

The main advantage of trading using opposite DYPNF CoLtd and LG Household positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DYPNF CoLtd 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 DYPNF 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.