Correlation Between LG Display and Hanwha Life

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

By analyzing existing cross correlation between LG Display and Hanwha Life Insurance, you can compare the effects of market volatilities on LG Display and Hanwha Life 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 Hanwha Life. Check out your portfolio center. Please also check ongoing floating volatility patterns of LG Display and Hanwha Life.

Diversification Opportunities for LG Display and Hanwha Life

0.39

Correlation Coefficient

LG Display  Hanwha Life

Weak diversification

The 3 months correlation between 034220 and Hanwha is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding LG Display and Hanwha Life Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hanwha Life Insurance 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 are associated (or correlated) with Hanwha Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hanwha Life Insurance has no effect on the direction of LG Display i.e., LG Display and Hanwha Life go up and down completely randomly.

Pair Corralation between LG Display and Hanwha Life

Assuming the 90 days trading horizon LG Display is expected to under-perform the Hanwha Life. But the stock apears to be less risky and, when comparing its historical volatility, LG Display is 1.2 times less risky than Hanwha Life. The stock trades about -0.02 of its potential returns per unit of risk. The Hanwha Life Insurance is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  253,000  in Hanwha Life Insurance on December 25, 2024 and sell it today you would earn a total of  10,500  from holding Hanwha Life Insurance or generate 4.15% return on investment over 90 days.

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

LG Display  vs.  Hanwha Life Insurance

LG Display

Risk-Adjusted Performance

Very Weak

Over the last 90 days LG Display has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, LG Display is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Hanwha Life Insurance

Risk-Adjusted Performance

Insignificant

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

Pair Trading with LG Display and Hanwha Life

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

The idea behind LG Display and Hanwha Life Insurance 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.

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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.