Correlation Between LG Display and Ribbon Communications
Can any of the company-specific risk be diversified away by investing in both LG Display and Ribbon 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 Ribbon 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 Ribbon Communications, you can compare the effects of market volatilities on LG Display and Ribbon 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 Ribbon Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of LG Display and Ribbon Communications.
Diversification Opportunities for LG Display and Ribbon Communications
-0.68 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between LGA and Ribbon is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding LG Display Co and Ribbon Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ribbon Communications 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 Ribbon Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ribbon Communications has no effect on the direction of LG Display i.e., LG Display and Ribbon Communications go up and down completely randomly.
Pair Corralation between LG Display and Ribbon Communications
Assuming the 90 days horizon LG Display Co is expected to under-perform the Ribbon Communications. But the stock apears to be less risky and, when comparing its historical volatility, LG Display Co is 1.96 times less risky than Ribbon Communications. The stock trades about -0.05 of its potential returns per unit of risk. The Ribbon Communications is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 338.00 in Ribbon Communications on August 28, 2024 and sell it today you would earn a total of 34.00 from holding Ribbon Communications or generate 10.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
LG Display Co vs. Ribbon Communications
Performance |
| Timeline |
| LG Display |
| Ribbon Communications |
LG Display and Ribbon Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LG Display and Ribbon Communications
The main advantage of trading using opposite LG Display and Ribbon Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LG Display position performs unexpectedly, Ribbon 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 Ribbon Communications will offset losses from the drop in Ribbon Communications' long position.| LG Display vs. DXC Technology Co | LG Display vs. Vishay Intertechnology | LG Display vs. SOUTHWEST AIRLINES | LG Display vs. Cars Inc |
| Ribbon Communications vs. T Mobile | Ribbon Communications vs. ATT Inc | Ribbon Communications vs. Deutsche Telekom AG |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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