Correlation Between Dongbu Insurance and LG Display
Can any of the company-specific risk be diversified away by investing in both Dongbu Insurance 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 Dongbu Insurance and LG Display into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dongbu Insurance Co and LG Display Co, you can compare the effects of market volatilities on Dongbu Insurance 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 Dongbu Insurance with a short position of LG Display. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dongbu Insurance and LG Display.
Diversification Opportunities for Dongbu Insurance and LG Display
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Dongbu and 034220 is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Dongbu Insurance Co and LG Display Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LG Display and Dongbu Insurance 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 Dongbu Insurance Co 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 Dongbu Insurance i.e., Dongbu Insurance and LG Display go up and down completely randomly.
Pair Corralation between Dongbu Insurance and LG Display
Assuming the 90 days trading horizon Dongbu Insurance Co is expected to under-perform the LG Display. In addition to that, Dongbu Insurance is 2.35 times more volatile than LG Display Co. It trades about -0.08 of its total potential returns per unit of risk. LG Display Co is currently generating about -0.03 per unit of volatility. If you would invest 932,000 in LG Display Co on November 6, 2024 and sell it today you would lose (7,000) from holding LG Display Co or give up 0.75% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dongbu Insurance Co vs. LG Display Co
Performance |
| Timeline |
| Dongbu Insurance |
| LG Display |
Dongbu Insurance and LG Display Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dongbu Insurance and LG Display
The main advantage of trading using opposite Dongbu Insurance and LG Display positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dongbu Insurance 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.| Dongbu Insurance vs. Korea Air Svc | Dongbu Insurance vs. T3 Entertainment Co | Dongbu Insurance vs. Cloud Air CoLtd | Dongbu Insurance vs. Tamul Multimedia Co |
| LG Display vs. Daejung Chemicals Metals | LG Display vs. Duksan Hi Metal | LG Display vs. Husteel | LG Display vs. INSUN Environmental New |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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