Correlation Between Dreamus and LG Display
Can any of the company-specific risk be diversified away by investing in both Dreamus 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 Dreamus and LG Display into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dreamus Company and LG Display, you can compare the effects of market volatilities on Dreamus 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 Dreamus with a short position of LG Display. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dreamus and LG Display.
Diversification Opportunities for Dreamus and LG Display
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Dreamus and 034220 is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Dreamus Company and LG Display in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LG Display and Dreamus 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 Dreamus Company 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 Dreamus i.e., Dreamus and LG Display go up and down completely randomly.
Pair Corralation between Dreamus and LG Display
Assuming the 90 days trading horizon Dreamus Company is expected to generate 1.66 times more return on investment than LG Display. However, Dreamus is 1.66 times more volatile than LG Display. It trades about 0.06 of its potential returns per unit of risk. LG Display is currently generating about -0.1 per unit of risk. If you would invest 160,200 in Dreamus Company on September 13, 2024 and sell it today you would earn a total of 5,600 from holding Dreamus Company or generate 3.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dreamus Company vs. LG Display
Performance |
| Timeline |
| Dreamus Company |
| LG Display |
Dreamus and LG Display Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dreamus and LG Display
The main advantage of trading using opposite Dreamus and LG Display positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dreamus 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.| Dreamus vs. Daou Data Corp | Dreamus vs. Solution Advanced Technology | Dreamus vs. Busan Industrial Co | Dreamus vs. Busan Ind |
| LG Display vs. Shinsegae Food | LG Display vs. Hankukpackage Co | LG Display vs. Hyundai Green Food | LG Display vs. Sam Yang Foods |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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