Correlation Between LG Display and HMM
Can any of the company-specific risk be diversified away by investing in both LG Display and HMM 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 LG Display and HMM into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LG Display and HMM Co, you can compare the effects of market volatilities on LG Display and HMM 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 LG Display with a short position of HMM. Check out your portfolio center. Please also check ongoing floating volatility patterns of LG Display and HMM.
Diversification Opportunities for LG Display and HMM
-0.18 | Correlation Coefficient |
Good diversification
The 3 months correlation between 034220 and HMM is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding LG Display and HMM Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HMM Co and LG Display 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 LG Display are associated (or correlated) with HMM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HMM Co has no effect on the direction of LG Display i.e., LG Display and HMM go up and down completely randomly.
Pair Corralation between LG Display and HMM
Assuming the 90 days trading horizon LG Display is expected to under-perform the HMM. But the stock apears to be less risky and, when comparing its historical volatility, LG Display is 1.1 times less risky than HMM. The stock trades about -0.18 of its potential returns per unit of risk. The HMM Co is currently generating about 0.31 of returns per unit of risk over similar time horizon. If you would invest 1,575,000 in HMM Co on September 12, 2024 and sell it today you would earn a total of 261,000 from holding HMM Co or generate 16.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
LG Display vs. HMM Co
Performance |
| Timeline |
| LG Display |
| HMM Co |
LG Display and HMM Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LG Display and HMM
The main advantage of trading using opposite LG Display and HMM positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LG Display position performs unexpectedly, HMM 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 HMM will offset losses from the drop in HMM's long position.| LG Display vs. Cube Entertainment | LG Display vs. Dreamus Company | LG Display vs. LG Energy Solution | LG Display vs. Dongwon System |
| HMM vs. Korea New Network | HMM vs. Solution Advanced Technology | HMM vs. Busan Industrial Co | HMM vs. Busan Ind |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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