Correlation Between Woorim Machinery and LG Display
Can any of the company-specific risk be diversified away by investing in both Woorim Machinery 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 Woorim Machinery and LG Display into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Woorim Machinery Co and LG Display, you can compare the effects of market volatilities on Woorim Machinery 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 Woorim Machinery with a short position of LG Display. Check out your portfolio center. Please also check ongoing floating volatility patterns of Woorim Machinery and LG Display.
Diversification Opportunities for Woorim Machinery and LG Display
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Woorim and 034220 is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Woorim Machinery Co and LG Display in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LG Display and Woorim Machinery 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 Woorim Machinery 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 Woorim Machinery i.e., Woorim Machinery and LG Display go up and down completely randomly.
Pair Corralation between Woorim Machinery and LG Display
Assuming the 90 days trading horizon Woorim Machinery Co is expected to generate 2.34 times more return on investment than LG Display. However, Woorim Machinery is 2.34 times more volatile than LG Display. It trades about -0.08 of its potential returns per unit of risk. LG Display is currently generating about -0.27 per unit of risk. If you would invest 540,000 in Woorim Machinery Co on September 4, 2024 and sell it today you would lose (40,000) from holding Woorim Machinery Co or give up 7.41% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Woorim Machinery Co vs. LG Display
Performance |
| Timeline |
| Woorim Machinery |
| LG Display |
Woorim Machinery and LG Display Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Woorim Machinery and LG Display
The main advantage of trading using opposite Woorim Machinery and LG Display positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Woorim Machinery 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.| Woorim Machinery vs. LG Display | Woorim Machinery vs. Hyundai Motor | Woorim Machinery vs. Hyundai Motor Co | Woorim Machinery vs. Hyundai Motor Co |
| LG Display vs. Sam Yang Foods | LG Display vs. Polaris Office Corp | LG Display vs. Sewoon Medical Co | LG Display vs. Okins Electronics 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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