Correlation Between LG Display and Dongkuk Structures

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

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

Diversification Opportunities for LG Display and Dongkuk Structures

0.12

Correlation Coefficient

LG Display  Dongkuk Structures

Average diversification

The 3 months correlation between 034220 and Dongkuk is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding LG Display and Dongkuk Structures Constructio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dongkuk Structures 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 Dongkuk Structures. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dongkuk Structures has no effect on the direction of LG Display i.e., LG Display and Dongkuk Structures go up and down completely randomly.

Pair Corralation between LG Display and Dongkuk Structures

Assuming the 90 days trading horizon LG Display is expected to under-perform the Dongkuk Structures. But the stock apears to be less risky and, when comparing its historical volatility, LG Display is 1.2 times less risky than Dongkuk Structures. The stock trades about -0.03 of its potential returns per unit of risk. The Dongkuk Structures Construction is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  222,000  in Dongkuk Structures Construction on December 1, 2024 and sell it today you would earn a total of  5,500  from holding Dongkuk Structures Construction or generate 2.48% return on investment over 90 days.

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

LG Display  vs.  Dongkuk Structures Constructio

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.

Dongkuk Structures

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Dongkuk Structures Construction are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Dongkuk Structures 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 Dongkuk Structures

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

The idea behind LG Display and Dongkuk Structures Construction 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.