Correlation Between Korea Aerospace and LG Display
Can any of the company-specific risk be diversified away by investing in both Korea Aerospace 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 Aerospace 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 Aerospace Industries and LG Display, you can compare the effects of market volatilities on Korea Aerospace 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 Aerospace with a short position of LG Display. Check out your portfolio center. Please also check ongoing floating volatility patterns of Korea Aerospace and LG Display.
Diversification Opportunities for Korea Aerospace and LG Display
-0.66 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Korea and 034220 is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Korea Aerospace Industries and LG Display in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LG Display and Korea Aerospace 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 Aerospace Industries 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 Aerospace i.e., Korea Aerospace and LG Display go up and down completely randomly.
Pair Corralation between Korea Aerospace and LG Display
Assuming the 90 days trading horizon Korea Aerospace Industries is expected to generate 2.18 times more return on investment than LG Display. However, Korea Aerospace is 2.18 times more volatile than LG Display. It trades about 0.04 of its potential returns per unit of risk. LG Display is currently generating about -0.3 per unit of risk. If you would invest 5,740,000 in Korea Aerospace Industries on September 3, 2024 and sell it today you would earn a total of 100,000 from holding Korea Aerospace Industries or generate 1.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Korea Aerospace Industries vs. LG Display
Performance |
| Timeline |
| Korea Aerospace Indu |
| LG Display |
Korea Aerospace and LG Display Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Korea Aerospace and LG Display
The main advantage of trading using opposite Korea Aerospace and LG Display positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Korea Aerospace 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 Aerospace vs. LG Display | Korea Aerospace vs. Hyundai Motor | Korea Aerospace vs. Hyundai Motor Co | Korea Aerospace vs. Hyundai Motor Co |
| LG Display vs. Cuckoo Homesys Co | LG Display vs. Duksan Hi Metal | LG Display vs. Youngsin Metal Industrial | LG Display vs. PJ Metal Co |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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