Correlation Between POSCO Holdings and LG Display
Can any of the company-specific risk be diversified away by investing in both POSCO Holdings 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 POSCO Holdings and LG Display into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between POSCO Holdings and LG Display Co, you can compare the effects of market volatilities on POSCO Holdings 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 POSCO Holdings with a short position of LG Display. Check out your portfolio center. Please also check ongoing floating volatility patterns of POSCO Holdings and LG Display.
Diversification Opportunities for POSCO Holdings and LG Display
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between POSCO and 034220 is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding POSCO Holdings and LG Display Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LG Display and POSCO Holdings 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 POSCO Holdings 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 POSCO Holdings i.e., POSCO Holdings and LG Display go up and down completely randomly.
Pair Corralation between POSCO Holdings and LG Display
Assuming the 90 days trading horizon POSCO Holdings is expected to generate 1.25 times more return on investment than LG Display. However, POSCO Holdings is 1.25 times more volatile than LG Display Co. It trades about 0.01 of its potential returns per unit of risk. LG Display Co is currently generating about -0.01 per unit of risk. If you would invest 27,524,600 in POSCO Holdings on September 12, 2024 and sell it today you would lose (424,600) from holding POSCO Holdings or give up 1.54% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
POSCO Holdings vs. LG Display Co
Performance |
| Timeline |
| POSCO Holdings |
| LG Display |
POSCO Holdings and LG Display Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with POSCO Holdings and LG Display
The main advantage of trading using opposite POSCO Holdings and LG Display positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if POSCO Holdings 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.| POSCO Holdings vs. LG Chemicals | POSCO Holdings vs. Hanwha Solutions | POSCO Holdings vs. Lotte Chemical Corp | POSCO Holdings vs. Hyundai Steel |
| 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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