Correlation Between Diageo PLC and LG Display
Can any of the company-specific risk be diversified away by investing in both Diageo PLC 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 Diageo PLC and LG Display into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Diageo PLC ADR and LG Display Co, you can compare the effects of market volatilities on Diageo PLC 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 Diageo PLC with a short position of LG Display. Check out your portfolio center. Please also check ongoing floating volatility patterns of Diageo PLC and LG Display.
Diversification Opportunities for Diageo PLC and LG Display
0.02 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Diageo and LPL is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Diageo PLC ADR and LG Display Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LG Display and Diageo PLC 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 Diageo PLC ADR 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 Diageo PLC i.e., Diageo PLC and LG Display go up and down completely randomly.
Pair Corralation between Diageo PLC and LG Display
Considering the 90-day investment horizon Diageo PLC ADR is expected to under-perform the LG Display. In addition to that, Diageo PLC is 1.55 times more volatile than LG Display Co. It trades about -0.09 of its total potential returns per unit of risk. LG Display Co is currently generating about 0.14 per unit of volatility. If you would invest 310.00 in LG Display Co on November 3, 2024 and sell it today you would earn a total of 13.00 from holding LG Display Co or generate 4.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Diageo PLC ADR vs. LG Display Co
Performance |
| Timeline |
| Diageo PLC ADR |
| LG Display |
Diageo PLC and LG Display Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Diageo PLC and LG Display
The main advantage of trading using opposite Diageo PLC and LG Display positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Diageo PLC 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.| Diageo PLC vs. Brown Forman | Diageo PLC vs. MGP Ingredients | Diageo PLC vs. Brown Forman | Diageo PLC vs. Constellation Brands Class |
| LG Display vs. VOXX International | LG Display vs. Emerson Radio | LG Display vs. Universal Electronics | LG Display vs. Sonos Inc |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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