Correlation Between LG Display and KB No4
Can any of the company-specific risk be diversified away by investing in both LG Display and KB No4 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 KB No4 into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LG Display and KB No4 SPAC, you can compare the effects of market volatilities on LG Display and KB No4 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 KB No4. Check out your portfolio center. Please also check ongoing floating volatility patterns of LG Display and KB No4.
Diversification Opportunities for LG Display and KB No4
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between 034220 and 205500 is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding LG Display and KB No4 SPAC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KB No4 SPAC 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 KB No4. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KB No4 SPAC has no effect on the direction of LG Display i.e., LG Display and KB No4 go up and down completely randomly.
Pair Corralation between LG Display and KB No4
Assuming the 90 days trading horizon LG Display is expected to under-perform the KB No4. But the stock apears to be less risky and, when comparing its historical volatility, LG Display is 1.07 times less risky than KB No4. The stock trades about -0.33 of its potential returns per unit of risk. The KB No4 SPAC is currently generating about -0.26 of returns per unit of risk over similar time horizon. If you would invest 112,600 in KB No4 SPAC on September 1, 2024 and sell it today you would lose (11,200) from holding KB No4 SPAC or give up 9.95% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
LG Display vs. KB No4 SPAC
Performance |
| Timeline |
| LG Display |
| KB No4 SPAC |
LG Display and KB No4 Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LG Display and KB No4
The main advantage of trading using opposite LG Display and KB No4 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LG Display position performs unexpectedly, KB No4 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 KB No4 will offset losses from the drop in KB No4'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 |
| KB No4 vs. Kukdo Chemical Co | KB No4 vs. CU Tech Corp | KB No4 vs. Youngchang Chemical Co | KB No4 vs. Miwon Chemical |
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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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