Correlation Between LG Display and CJ ENM
Can any of the company-specific risk be diversified away by investing in both LG Display and CJ ENM 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 CJ ENM into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LG Display and CJ ENM, you can compare the effects of market volatilities on LG Display and CJ ENM 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 CJ ENM. Check out your portfolio center. Please also check ongoing floating volatility patterns of LG Display and CJ ENM.
Diversification Opportunities for LG Display and CJ ENM
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between 034220 and 035760 is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding LG Display and CJ ENM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CJ ENM 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 CJ ENM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CJ ENM has no effect on the direction of LG Display i.e., LG Display and CJ ENM go up and down completely randomly.
Pair Corralation between LG Display and CJ ENM
Assuming the 90 days trading horizon LG Display is expected to under-perform the CJ ENM. But the stock apears to be less risky and, when comparing its historical volatility, LG Display is 2.21 times less risky than CJ ENM. The stock trades about -0.26 of its potential returns per unit of risk. The CJ ENM is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 6,150,000 in CJ ENM on September 2, 2024 and sell it today you would earn a total of 320,000 from holding CJ ENM or generate 5.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
LG Display vs. CJ ENM
Performance |
| Timeline |
| LG Display |
| CJ ENM |
LG Display and CJ ENM Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LG Display and CJ ENM
The main advantage of trading using opposite LG Display and CJ ENM positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LG Display position performs unexpectedly, CJ ENM 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 CJ ENM will offset losses from the drop in CJ ENM's long position.| LG Display vs. Dongsin Engineering Construction | LG Display vs. Doosan Fuel Cell | LG Display vs. Daishin Balance 1 | LG Display vs. Total Soft Bank |
| CJ ENM vs. LG Display | CJ ENM vs. Hyundai Motor Co | CJ ENM vs. Hyundai Motor Co | CJ ENM vs. Adaptive Plasma Technology |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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