Correlation Between LG Chemicals and LG Display
Can any of the company-specific risk be diversified away by investing in both LG Chemicals 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 LG Chemicals and LG Display into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LG Chemicals and LG Display, you can compare the effects of market volatilities on LG Chemicals 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 LG Chemicals with a short position of LG Display. Check out your portfolio center. Please also check ongoing floating volatility patterns of LG Chemicals and LG Display.
Diversification Opportunities for LG Chemicals and LG Display
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between 051910 and 034220 is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding LG Chemicals and LG Display in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LG Display and LG Chemicals 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 Chemicals 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 LG Chemicals i.e., LG Chemicals and LG Display go up and down completely randomly.
Pair Corralation between LG Chemicals and LG Display
Assuming the 90 days trading horizon LG Chemicals is expected to generate 1.32 times more return on investment than LG Display. However, LG Chemicals is 1.32 times more volatile than LG Display. It trades about 0.12 of its potential returns per unit of risk. LG Display is currently generating about 0.09 per unit of risk. If you would invest 23,750,000 in LG Chemicals on November 29, 2024 and sell it today you would earn a total of 1,450,000 from holding LG Chemicals or generate 6.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
LG Chemicals vs. LG Display
Performance |
| Timeline |
| LG Chemicals |
| LG Display |
LG Chemicals and LG Display Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LG Chemicals and LG Display
The main advantage of trading using opposite LG Chemicals and LG Display positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LG Chemicals 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.| LG Chemicals vs. Formetal Co | LG Chemicals vs. Dongbang Transport Logistics | LG Chemicals vs. BGF Retail Co | LG Chemicals vs. Polaris Office Corp |
| LG Display vs. AeroSpace Technology of | LG Display vs. Industrial Bank | LG Display vs. Kukil Metal Co | LG Display vs. Daejung Chemicals Metals |
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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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