Correlation Between LG Display and ORIX
Can any of the company-specific risk be diversified away by investing in both LG Display and ORIX 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 ORIX 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 ORIX Corporation, you can compare the effects of market volatilities on LG Display and ORIX 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 ORIX. Check out your portfolio center. Please also check ongoing floating volatility patterns of LG Display and ORIX.
Diversification Opportunities for LG Display and ORIX
0.46 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between LGA and ORIX is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding LG Display Co and ORIX Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ORIX 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 ORIX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ORIX has no effect on the direction of LG Display i.e., LG Display and ORIX go up and down completely randomly.
Pair Corralation between LG Display and ORIX
Assuming the 90 days horizon LG Display is expected to generate 1.84 times less return on investment than ORIX. In addition to that, LG Display is 1.08 times more volatile than ORIX Corporation. It trades about 0.01 of its total potential returns per unit of risk. ORIX Corporation is currently generating about 0.02 per unit of volatility. If you would invest 1,960 in ORIX Corporation on August 25, 2024 and sell it today you would earn a total of 60.00 from holding ORIX Corporation or generate 3.06% 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. ORIX Corp.
Performance |
| Timeline |
| LG Display |
| ORIX |
LG Display and ORIX Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LG Display and ORIX
The main advantage of trading using opposite LG Display and ORIX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LG Display position performs unexpectedly, ORIX 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 ORIX will offset losses from the drop in ORIX's long position.| LG Display vs. Amazon Inc | LG Display vs. Microsoft | LG Display vs. Tesla Inc | LG Display vs. Alphabet Class A |
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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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