Correlation Between LG Display and Gamma Communications
Can any of the company-specific risk be diversified away by investing in both LG Display and Gamma Communications 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 Display and Gamma Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LG Display Co and Gamma Communications plc, you can compare the effects of market volatilities on LG Display and Gamma Communications 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 Display with a short position of Gamma Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of LG Display and Gamma Communications.
Diversification Opportunities for LG Display and Gamma Communications
0.03 | Correlation Coefficient |
Significant diversification
The 3 months correlation between LGA and Gamma is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding LG Display Co and Gamma Communications plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gamma Communications plc and LG Display 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 Display Co are associated (or correlated) with Gamma Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gamma Communications plc has no effect on the direction of LG Display i.e., LG Display and Gamma Communications go up and down completely randomly.
Pair Corralation between LG Display and Gamma Communications
Assuming the 90 days horizon LG Display Co is expected to generate 0.98 times more return on investment than Gamma Communications. However, LG Display Co is 1.02 times less risky than Gamma Communications. It trades about -0.05 of its potential returns per unit of risk. Gamma Communications plc is currently generating about -0.06 per unit of risk. If you would invest 340.00 in LG Display Co on August 28, 2024 and sell it today you would lose (6.00) from holding LG Display Co or give up 1.76% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
LG Display Co vs. Gamma Communications plc
Performance |
| Timeline |
| LG Display |
| Gamma Communications plc |
LG Display and Gamma Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LG Display and Gamma Communications
The main advantage of trading using opposite LG Display and Gamma Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LG Display position performs unexpectedly, Gamma Communications 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 Gamma Communications will offset losses from the drop in Gamma Communications' long position.| LG Display vs. DXC Technology Co | LG Display vs. Vishay Intertechnology | LG Display vs. SOUTHWEST AIRLINES | LG Display vs. Cars Inc |
| Gamma Communications vs. QINGCI GAMES INC | Gamma Communications vs. TROPHY GAMES DEV | Gamma Communications vs. GigaMedia | Gamma Communications vs. Perseus Mining 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 Transaction History module to view history of all your transactions and understand their impact on performance.
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