Correlation Between LG Display and X-FAB Silicon
Can any of the company-specific risk be diversified away by investing in both LG Display and X-FAB Silicon 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 X-FAB Silicon 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 X FAB Silicon Foundries, you can compare the effects of market volatilities on LG Display and X-FAB Silicon 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 X-FAB Silicon. Check out your portfolio center. Please also check ongoing floating volatility patterns of LG Display and X-FAB Silicon.
Diversification Opportunities for LG Display and X-FAB Silicon
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between LGA and X-FAB is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding LG Display Co and X FAB Silicon Foundries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on X FAB Silicon 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 X-FAB Silicon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of X FAB Silicon has no effect on the direction of LG Display i.e., LG Display and X-FAB Silicon go up and down completely randomly.
Pair Corralation between LG Display and X-FAB Silicon
Assuming the 90 days horizon LG Display Co is expected to generate 1.01 times more return on investment than X-FAB Silicon. However, LG Display is 1.01 times more volatile than X FAB Silicon Foundries. It trades about -0.05 of its potential returns per unit of risk. X FAB Silicon Foundries is currently generating about -0.06 per unit of risk. If you would invest 585.00 in LG Display Co on August 31, 2024 and sell it today you would lose (251.00) from holding LG Display Co or give up 42.91% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.74% |
| Values | Daily Returns |
LG Display Co vs. X FAB Silicon Foundries
Performance |
| Timeline |
| LG Display |
| X FAB Silicon |
LG Display and X-FAB Silicon Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LG Display and X-FAB Silicon
The main advantage of trading using opposite LG Display and X-FAB Silicon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LG Display position performs unexpectedly, X-FAB Silicon 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 X-FAB Silicon will offset losses from the drop in X-FAB Silicon's long position.| LG Display vs. SK TELECOM TDADR | LG Display vs. Rogers Communications | LG Display vs. Entravision Communications | LG Display vs. Singapore Telecommunications Limited |
| X-FAB Silicon vs. Apple Inc | X-FAB Silicon vs. Apple Inc | X-FAB Silicon vs. Apple Inc | X-FAB Silicon 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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