Correlation Between LG Display and American Eagle
Can any of the company-specific risk be diversified away by investing in both LG Display and American Eagle 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 American Eagle 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 American Eagle Outfitters, you can compare the effects of market volatilities on LG Display and American Eagle 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 American Eagle. Check out your portfolio center. Please also check ongoing floating volatility patterns of LG Display and American Eagle.
Diversification Opportunities for LG Display and American Eagle
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between LGA and American is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding LG Display Co and American Eagle Outfitters in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Eagle Outfitters 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 American Eagle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Eagle Outfitters has no effect on the direction of LG Display i.e., LG Display and American Eagle go up and down completely randomly.
Pair Corralation between LG Display and American Eagle
Assuming the 90 days horizon LG Display Co is expected to under-perform the American Eagle. But the stock apears to be less risky and, when comparing its historical volatility, LG Display Co is 1.08 times less risky than American Eagle. The stock trades about -0.05 of its potential returns per unit of risk. The American Eagle Outfitters is currently generating about 0.05 of returns per unit of risk over similar time horizon. 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 |
LG Display Co vs. American Eagle Outfitters
Performance |
| Timeline |
| LG Display |
| American Eagle Outfitters |
LG Display and American Eagle Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LG Display and American Eagle
The main advantage of trading using opposite LG Display and American Eagle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LG Display position performs unexpectedly, American Eagle 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 American Eagle will offset losses from the drop in American Eagle's long position.| LG Display vs. Samsung Electronics Co | LG Display vs. Samsung Electronics Co | LG Display vs. Sony Group | LG Display vs. Superior Plus Corp |
| American Eagle vs. Apple Inc | American Eagle vs. Apple Inc | American Eagle vs. Apple Inc | American Eagle vs. Apple 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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