Correlation Between LG Display and Nippon Steel
Can any of the company-specific risk be diversified away by investing in both LG Display and Nippon Steel 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 Nippon Steel 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 Nippon Steel, you can compare the effects of market volatilities on LG Display and Nippon Steel 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 Nippon Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of LG Display and Nippon Steel.
Diversification Opportunities for LG Display and Nippon Steel
0.56 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between LGA and Nippon is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding LG Display Co and Nippon Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nippon Steel 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 Nippon Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nippon Steel has no effect on the direction of LG Display i.e., LG Display and Nippon Steel go up and down completely randomly.
Pair Corralation between LG Display and Nippon Steel
Assuming the 90 days horizon LG Display Co is expected to under-perform the Nippon Steel. But the stock apears to be less risky and, when comparing its historical volatility, LG Display Co is 1.4 times less risky than Nippon Steel. The stock trades about -0.27 of its potential returns per unit of risk. The Nippon Steel is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 1,870 in Nippon Steel on August 30, 2024 and sell it today you would earn a total of 12.00 from holding Nippon Steel or generate 0.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
LG Display Co vs. Nippon Steel
Performance |
| Timeline |
| LG Display |
| Nippon Steel |
LG Display and Nippon Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LG Display and Nippon Steel
The main advantage of trading using opposite LG Display and Nippon Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LG Display position performs unexpectedly, Nippon Steel 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 Nippon Steel will offset losses from the drop in Nippon Steel's long position.| LG Display vs. JAPAN TOBACCO UNSPADR12 | LG Display vs. Grupo Carso SAB | LG Display vs. XLMedia PLC | LG Display vs. Dave Busters Entertainment |
| Nippon Steel vs. Apple Inc | Nippon Steel vs. Apple Inc | Nippon Steel vs. Superior Plus Corp | Nippon Steel vs. SIVERS SEMICONDUCTORS AB |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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