Correlation Between LG Display and Microsoft
Can any of the company-specific risk be diversified away by investing in both LG Display and Microsoft 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 Microsoft 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 Microsoft, you can compare the effects of market volatilities on LG Display and Microsoft 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 Microsoft. Check out your portfolio center. Please also check ongoing floating volatility patterns of LG Display and Microsoft.
Diversification Opportunities for LG Display and Microsoft
-0.58 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between LGA and Microsoft is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding LG Display Co and Microsoft in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microsoft 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 Microsoft. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microsoft has no effect on the direction of LG Display i.e., LG Display and Microsoft go up and down completely randomly.
Pair Corralation between LG Display and Microsoft
Assuming the 90 days horizon LG Display Co is expected to under-perform the Microsoft. But the stock apears to be less risky and, when comparing its historical volatility, LG Display Co is 1.26 times less risky than Microsoft. The stock trades about -0.11 of its potential returns per unit of risk. The Microsoft is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 39,172 in Microsoft on August 25, 2024 and sell it today you would earn a total of 353.00 from holding Microsoft or generate 0.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
LG Display Co vs. Microsoft
Performance |
| Timeline |
| LG Display |
| Microsoft |
LG Display and Microsoft Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LG Display and Microsoft
The main advantage of trading using opposite LG Display and Microsoft positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LG Display position performs unexpectedly, Microsoft 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 Microsoft will offset losses from the drop in Microsoft's long position.| LG Display vs. Amazon Inc | LG Display vs. Microsoft | LG Display vs. Tesla Inc | LG Display vs. Alphabet Class A |
| Microsoft vs. PLAYSTUDIOS A DL 0001 | Microsoft vs. Ming Le Sports | Microsoft vs. GREENX METALS LTD | Microsoft vs. LG Display Co |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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