Correlation Between Daihan Pharmaceutical and LG Display

Can any of the company-specific risk be diversified away by investing in both Daihan Pharmaceutical and LG Display 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 Daihan Pharmaceutical and LG Display into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Daihan Pharmaceutical CoLtd and LG Display Co, you can compare the effects of market volatilities on Daihan Pharmaceutical and LG Display 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 Daihan Pharmaceutical with a short position of LG Display. Check out your portfolio center. Please also check ongoing floating volatility patterns of Daihan Pharmaceutical and LG Display.

Diversification Opportunities for Daihan Pharmaceutical and LG Display

-0.57

Correlation Coefficient

Daihan Pharmaceutical  LG Display

Excellent diversification

The 3 months correlation between Daihan and 034220 is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Daihan Pharmaceutical CoLtd and LG Display Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LG Display and Daihan Pharmaceutical 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 Daihan Pharmaceutical CoLtd are associated (or correlated) with LG Display. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LG Display has no effect on the direction of Daihan Pharmaceutical i.e., Daihan Pharmaceutical and LG Display go up and down completely randomly.

Pair Corralation between Daihan Pharmaceutical and LG Display

Assuming the 90 days trading horizon Daihan Pharmaceutical is expected to generate 1.75 times less return on investment than LG Display. But when comparing it to its historical volatility, Daihan Pharmaceutical CoLtd is 2.11 times less risky than LG Display. It trades about 0.08 of its potential returns per unit of risk. LG Display Co is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  918,000  in LG Display Co on October 11, 2024 and sell it today you would earn a total of  20,000  from holding LG Display Co or generate 2.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Daihan Pharmaceutical CoLtd  vs.  LG Display Co

Daihan Pharmaceutical

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Daihan Pharmaceutical CoLtd are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Daihan Pharmaceutical is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

LG Display

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LG Display Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Daihan Pharmaceutical and LG Display

The main advantage of trading using opposite Daihan Pharmaceutical and LG Display positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Daihan Pharmaceutical position performs unexpectedly, LG Display 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 LG Display will offset losses from the drop in LG Display's long position.

The idea behind Daihan Pharmaceutical CoLtd and LG Display Co pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.