Correlation Between American Eagle and LG Display
Can any of the company-specific risk be diversified away by investing in both American Eagle 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 American Eagle and LG Display into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Eagle Outfitters and LG Display Co, you can compare the effects of market volatilities on American Eagle 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 American Eagle with a short position of LG Display. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Eagle and LG Display.
Diversification Opportunities for American Eagle and LG Display
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between American and LGA is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding American Eagle Outfitters and LG Display Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LG Display and American Eagle 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 American Eagle Outfitters 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 American Eagle i.e., American Eagle and LG Display go up and down completely randomly.
Pair Corralation between American Eagle and LG Display
Assuming the 90 days trading horizon American Eagle Outfitters is expected to generate 1.08 times more return on investment than LG Display. However, American Eagle is 1.08 times more volatile than LG Display Co. It trades about 0.05 of its potential returns per unit of risk. LG Display Co is currently generating about -0.05 per unit of risk. If you would invest 1,150 in American Eagle Outfitters on September 12, 2024 and sell it today you would earn a total of 550.00 from holding American Eagle Outfitters or generate 47.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Eagle Outfitters vs. LG Display Co
Performance |
| Timeline |
| American Eagle Outfitters |
| LG Display |
American Eagle and LG Display Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Eagle and LG Display
The main advantage of trading using opposite American Eagle and LG Display positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Eagle 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.| American Eagle vs. Apple Inc | American Eagle vs. Apple Inc | American Eagle vs. Apple Inc | American Eagle vs. Apple Inc |
| LG Display vs. Samsung Electronics Co | LG Display vs. Samsung Electronics Co | LG Display vs. Sony Group | LG Display vs. Superior Plus Corp |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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