Correlation Between Korea Ratings and LG Display
Can any of the company-specific risk be diversified away by investing in both Korea Ratings 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 Korea Ratings and LG Display into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Korea Ratings Co and LG Display, you can compare the effects of market volatilities on Korea Ratings 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 Korea Ratings with a short position of LG Display. Check out your portfolio center. Please also check ongoing floating volatility patterns of Korea Ratings and LG Display.
Diversification Opportunities for Korea Ratings and LG Display
-0.11 | Correlation Coefficient |
Good diversification
The 3 months correlation between Korea and 034220 is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Korea Ratings Co and LG Display in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LG Display and Korea Ratings 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 Korea Ratings Co 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 Korea Ratings i.e., Korea Ratings and LG Display go up and down completely randomly.
Pair Corralation between Korea Ratings and LG Display
Assuming the 90 days trading horizon Korea Ratings is expected to generate 3.89 times less return on investment than LG Display. But when comparing it to its historical volatility, Korea Ratings Co is 3.6 times less risky than LG Display. It trades about 0.01 of its potential returns per unit of risk. LG Display is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 993,000 in LG Display on August 29, 2024 and sell it today you would lose (13,000) from holding LG Display or give up 1.31% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Korea Ratings Co vs. LG Display
Performance |
| Timeline |
| Korea Ratings |
| LG Display |
Korea Ratings and LG Display Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Korea Ratings and LG Display
The main advantage of trading using opposite Korea Ratings and LG Display positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Korea Ratings 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.| Korea Ratings vs. Kukdo Chemical Co | Korea Ratings vs. Daehan Synthetic Fiber | Korea Ratings vs. Youngbo Chemical Co | Korea Ratings vs. LG Electronics Pfd |
| LG Display vs. Daou Data Corp | LG Display vs. Busan Industrial Co | LG Display vs. Busan Ind | LG Display vs. Shinhan WTI Futures |
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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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