Correlation Between LG Display and Daejoo Electronic
Can any of the company-specific risk be diversified away by investing in both LG Display and Daejoo Electronic 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 Daejoo Electronic into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LG Display Co and Daejoo Electronic Materials, you can compare the effects of market volatilities on LG Display and Daejoo Electronic 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 Daejoo Electronic. Check out your portfolio center. Please also check ongoing floating volatility patterns of LG Display and Daejoo Electronic.
Diversification Opportunities for LG Display and Daejoo Electronic
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between 034220 and Daejoo is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding LG Display Co and Daejoo Electronic Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daejoo Electronic 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 Co are associated (or correlated) with Daejoo Electronic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daejoo Electronic has no effect on the direction of LG Display i.e., LG Display and Daejoo Electronic go up and down completely randomly.
Pair Corralation between LG Display and Daejoo Electronic
Assuming the 90 days trading horizon LG Display Co is expected to generate 0.45 times more return on investment than Daejoo Electronic. However, LG Display Co is 2.22 times less risky than Daejoo Electronic. It trades about -0.33 of its potential returns per unit of risk. Daejoo Electronic Materials is currently generating about -0.33 per unit of risk. If you would invest 1,064,000 in LG Display Co on September 1, 2024 and sell it today you would lose (116,000) from holding LG Display Co or give up 10.9% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
LG Display Co vs. Daejoo Electronic Materials
Performance |
| Timeline |
| LG Display |
| Daejoo Electronic |
LG Display and Daejoo Electronic Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LG Display and Daejoo Electronic
The main advantage of trading using opposite LG Display and Daejoo Electronic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LG Display position performs unexpectedly, Daejoo Electronic 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 Daejoo Electronic will offset losses from the drop in Daejoo Electronic's long position.| LG Display vs. AptaBio Therapeutics | LG Display vs. Daewoo SBI SPAC | LG Display vs. Dream Security co | LG Display vs. Microfriend |
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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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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