Correlation Between Cars and LG Display
Can any of the company-specific risk be diversified away by investing in both Cars 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 Cars and LG Display into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cars Inc and LG Display Co, you can compare the effects of market volatilities on Cars 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 Cars with a short position of LG Display. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cars and LG Display.
Diversification Opportunities for Cars and LG Display
-0.5 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Cars and LGA is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Cars Inc and LG Display Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LG Display and Cars 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 Cars Inc 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 Cars i.e., Cars and LG Display go up and down completely randomly.
Pair Corralation between Cars and LG Display
Assuming the 90 days horizon Cars Inc is expected to generate 1.13 times more return on investment than LG Display. However, Cars is 1.13 times more volatile than LG Display Co. It trades about 0.02 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 1,700 in Cars Inc on August 31, 2024 and sell it today you would earn a total of 160.00 from holding Cars Inc or generate 9.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cars Inc vs. LG Display Co
Performance |
| Timeline |
| Cars Inc |
| LG Display |
Cars and LG Display Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cars and LG Display
The main advantage of trading using opposite Cars and LG Display positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cars 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.| Cars vs. SALESFORCE INC CDR | Cars vs. FAST RETAIL ADR | Cars vs. Auto Trader Group | Cars vs. SHIP HEALTHCARE HLDGINC |
| LG Display vs. SK TELECOM TDADR | LG Display vs. Rogers Communications | LG Display vs. Entravision Communications | LG Display vs. Singapore Telecommunications Limited |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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