Correlation Between Digital Power and LG Display
Can any of the company-specific risk be diversified away by investing in both Digital Power 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 Digital Power and LG Display into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Digital Power Communications and LG Display Co, you can compare the effects of market volatilities on Digital Power 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 Digital Power with a short position of LG Display. Check out your portfolio center. Please also check ongoing floating volatility patterns of Digital Power and LG Display.
Diversification Opportunities for Digital Power and LG Display
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Digital and 034220 is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Digital Power Communications and LG Display Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LG Display and Digital Power 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 Digital Power Communications 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 Digital Power i.e., Digital Power and LG Display go up and down completely randomly.
Pair Corralation between Digital Power and LG Display
Assuming the 90 days trading horizon Digital Power Communications is expected to generate 1.32 times more return on investment than LG Display. However, Digital Power is 1.32 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 -0.33 per unit of risk. If you would invest 808,000 in Digital Power Communications on September 1, 2024 and sell it today you would earn a total of 20,000 from holding Digital Power Communications or generate 2.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Digital Power Communications vs. LG Display Co
Performance |
| Timeline |
| Digital Power Commun |
| LG Display |
Digital Power and LG Display Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Digital Power and LG Display
The main advantage of trading using opposite Digital Power and LG Display positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Digital Power 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.| Digital Power vs. AptaBio Therapeutics | Digital Power vs. Daewoo SBI SPAC | Digital Power vs. Dream Security co | Digital Power vs. Microfriend |
| LG Display vs. AptaBio Therapeutics | LG Display vs. Daewoo SBI SPAC | LG Display vs. Dream Security co | LG Display vs. Microfriend |
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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