Correlation Between Daejoo and LG Display
Can any of the company-specific risk be diversified away by investing in both Daejoo 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 Daejoo and LG Display into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Daejoo Inc and LG Display, you can compare the effects of market volatilities on Daejoo 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 Daejoo with a short position of LG Display. Check out your portfolio center. Please also check ongoing floating volatility patterns of Daejoo and LG Display.
Diversification Opportunities for Daejoo and LG Display
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Daejoo and 034220 is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Daejoo Inc and LG Display in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LG Display and Daejoo 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 Daejoo Inc 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 Daejoo i.e., Daejoo and LG Display go up and down completely randomly.
Pair Corralation between Daejoo and LG Display
Assuming the 90 days trading horizon Daejoo Inc is expected to under-perform the LG Display. But the stock apears to be less risky and, when comparing its historical volatility, Daejoo Inc is 1.66 times less risky than LG Display. The stock trades about -0.06 of its potential returns per unit of risk. The LG Display is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest 1,260,000 in LG Display on September 4, 2024 and sell it today you would lose (280,000) from holding LG Display or give up 22.22% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Daejoo Inc vs. LG Display
Performance |
| Timeline |
| Daejoo Inc |
| LG Display |
Daejoo and LG Display Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Daejoo and LG Display
The main advantage of trading using opposite Daejoo and LG Display positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Daejoo 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.| Daejoo vs. Jeong Moon Information | Daejoo vs. Ssangyong Information Communication | Daejoo vs. PJ Metal Co | Daejoo vs. Taeyang Metal Industrial |
| LG Display vs. Sam Yang Foods | LG Display vs. Polaris Office Corp | LG Display vs. Sewoon Medical Co | LG Display vs. Okins Electronics Co |
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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