Correlation Between KG Eco and LG Display
Can any of the company-specific risk be diversified away by investing in both KG Eco 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 KG Eco and LG Display into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between KG Eco Technology and LG Display, you can compare the effects of market volatilities on KG Eco 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 KG Eco with a short position of LG Display. Check out your portfolio center. Please also check ongoing floating volatility patterns of KG Eco and LG Display.
Diversification Opportunities for KG Eco and LG Display
0.41 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between 151860 and 034220 is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding KG Eco Technology and LG Display in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LG Display and KG Eco 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 KG Eco Technology 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 KG Eco i.e., KG Eco and LG Display go up and down completely randomly.
Pair Corralation between KG Eco and LG Display
Assuming the 90 days trading horizon KG Eco Technology is expected to under-perform the LG Display. In addition to that, KG Eco is 1.59 times more volatile than LG Display. It trades about -0.05 of its total potential returns per unit of risk. LG Display is currently generating about -0.03 per unit of volatility. If you would invest 1,456,000 in LG Display on December 8, 2024 and sell it today you would lose (545,000) from holding LG Display or give up 37.43% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.58% |
| Values | Daily Returns |
KG Eco Technology vs. LG Display
Performance |
| Timeline |
| KG Eco Technology |
| LG Display |
KG Eco and LG Display Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with KG Eco and LG Display
The main advantage of trading using opposite KG Eco and LG Display positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KG Eco 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.| KG Eco vs. GS Engineering Construction | ||
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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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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