Correlation Between SK Hynix and LG Display
Can any of the company-specific risk be diversified away by investing in both SK Hynix and LG Display 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 SK Hynix and LG Display into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SK Hynix and LG Display Co, you can compare the effects of market volatilities on SK Hynix and LG Display 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 SK Hynix with a short position of LG Display. Check out your portfolio center. Please also check ongoing floating volatility patterns of SK Hynix and LG Display.
Diversification Opportunities for SK Hynix and LG Display
0.06 | Correlation Coefficient |
Significant diversification
The 3 months correlation between 000660 and 034220 is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding SK Hynix and LG Display Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LG Display and SK Hynix 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 SK Hynix are associated (or correlated) with LG Display. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LG Display has no effect on the direction of SK Hynix i.e., SK Hynix and LG Display go up and down completely randomly.
Pair Corralation between SK Hynix and LG Display
Assuming the 90 days trading horizon SK Hynix is expected to generate 1.21 times more return on investment than LG Display. However, SK Hynix is 1.21 times more volatile than LG Display Co. It trades about 0.06 of its potential returns per unit of risk. LG Display Co is currently generating about -0.03 per unit of risk. If you would invest 11,532,500 in SK Hynix on September 12, 2024 and sell it today you would earn a total of 5,507,500 from holding SK Hynix or generate 47.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
SK Hynix vs. LG Display Co
Performance |
| Timeline |
| SK Hynix |
| LG Display |
SK Hynix and LG Display Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SK Hynix and LG Display
The main advantage of trading using opposite SK Hynix and LG Display positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SK Hynix position performs unexpectedly, LG Display 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 Display will offset losses from the drop in LG Display's long position.| SK Hynix vs. Cube Entertainment | SK Hynix vs. Dreamus Company | SK Hynix vs. LG Energy Solution | SK Hynix vs. Dongwon System |
| LG Display vs. Samsung Electronics Co | LG Display vs. Samsung Electronics Co | LG Display vs. SK Hynix | LG Display vs. POSCO Holdings |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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