Correlation Between LG Energy and LG Display
Can any of the company-specific risk be diversified away by investing in both LG Energy 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 Energy 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 Energy Solution and LG Display, you can compare the effects of market volatilities on LG Energy 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 Energy with a short position of LG Display. Check out your portfolio center. Please also check ongoing floating volatility patterns of LG Energy and LG Display.
Diversification Opportunities for LG Energy and LG Display
0.34 | Correlation Coefficient |
Weak diversification
The 3 months correlation between 373220 and 034220 is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding LG Energy Solution and LG Display in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LG Display and LG Energy 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 Energy Solution 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 Energy i.e., LG Energy and LG Display go up and down completely randomly.
Pair Corralation between LG Energy and LG Display
Assuming the 90 days trading horizon LG Energy Solution is expected to under-perform the LG Display. In addition to that, LG Energy is 1.65 times more volatile than LG Display. It trades about -0.14 of its total potential returns per unit of risk. LG Display is currently generating about -0.1 per unit of volatility. If you would invest 983,000 in LG Display on September 13, 2024 and sell it today you would lose (48,000) from holding LG Display or give up 4.88% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
LG Energy Solution vs. LG Display
Performance |
| Timeline |
| LG Energy Solution |
| LG Display |
LG Energy and LG Display Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LG Energy and LG Display
The main advantage of trading using opposite LG Energy and LG Display positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LG Energy 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 Energy vs. Daejung Chemicals Metals | LG Energy vs. Youngsin Metal Industrial | LG Energy vs. Seoul Electronics Telecom | LG Energy vs. ITM Semiconductor Co |
| 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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