Correlation Between British American and LG Display
Can any of the company-specific risk be diversified away by investing in both British American 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 British American and LG Display into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between British American Tobacco and LG Display Co, you can compare the effects of market volatilities on British American 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 British American with a short position of LG Display. Check out your portfolio center. Please also check ongoing floating volatility patterns of British American and LG Display.
Diversification Opportunities for British American and LG Display
-0.44 | Correlation Coefficient |
Very good diversification
The 3 months correlation between British and LGA is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding British American Tobacco and LG Display Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LG Display and British American 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 British American Tobacco 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 British American i.e., British American and LG Display go up and down completely randomly.
Pair Corralation between British American and LG Display
Assuming the 90 days trading horizon British American Tobacco is expected to generate 0.42 times more return on investment than LG Display. However, British American Tobacco is 2.4 times less risky than LG Display. It trades about 0.18 of its potential returns per unit of risk. LG Display Co is currently generating about 0.01 per unit of risk. If you would invest 2,778 in British American Tobacco on September 5, 2024 and sell it today you would earn a total of 770.00 from holding British American Tobacco or generate 27.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 99.22% |
| Values | Daily Returns |
British American Tobacco vs. LG Display Co
Performance |
| Timeline |
| British American Tobacco |
| LG Display |
British American and LG Display Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with British American and LG Display
The main advantage of trading using opposite British American and LG Display positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if British American 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.| British American vs. British American Tobacco | British American vs. JAPAN TOBACCO UNSPADR12 | British American vs. Imperial Brands PLC |
| LG Display vs. Sumitomo Rubber Industries | LG Display vs. Materialise NV | LG Display vs. ADRIATIC METALS LS 013355 | LG Display vs. British American Tobacco |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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