Correlation Between LG Household and Kisan Telecom

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

Diversification Opportunities for LG Household and Kisan Telecom

0.09

Correlation Coefficient

LG Household  Kisan Telecom

Significant diversification

The 3 months correlation between 051900 and Kisan is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding LG Household Healthcare and Kisan Telecom Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kisan Telecom 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 Kisan Telecom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kisan Telecom has no effect on the direction of LG Household i.e., LG Household and Kisan Telecom go up and down completely randomly.

Pair Corralation between LG Household and Kisan Telecom

Assuming the 90 days trading horizon LG Household Healthcare is expected to generate 1.05 times more return on investment than Kisan Telecom. However, LG Household is 1.05 times more volatile than Kisan Telecom Co. It trades about -0.09 of its potential returns per unit of risk. Kisan Telecom Co is currently generating about -0.1 per unit of risk. If you would invest  32,050,000  in LG Household Healthcare on September 28, 2024 and sell it today you would lose (1,100,000) 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	Insignificant
Accuracy	100.0%
Values	Daily Returns

LG Household Healthcare  vs.  Kisan Telecom Co

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 weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Kisan Telecom

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kisan Telecom Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Kisan Telecom is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with LG Household and Kisan Telecom

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

The idea behind LG Household Healthcare and Kisan Telecom Co 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.