Correlation Between LG Display and Daesung Industrial

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

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

Diversification Opportunities for LG Display and Daesung Industrial

0.26

Correlation Coefficient

LG Display  Daesung Industrial

Modest diversification

The 3 months correlation between 034220 and Daesung is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding LG Display and Daesung Industrial Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daesung Industrial 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 Daesung Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daesung Industrial has no effect on the direction of LG Display i.e., LG Display and Daesung Industrial go up and down completely randomly.

Pair Corralation between LG Display and Daesung Industrial

Assuming the 90 days trading horizon LG Display is expected to under-perform the Daesung Industrial. In addition to that, LG Display is 1.08 times more volatile than Daesung Industrial Co. It trades about -0.05 of its total potential returns per unit of risk. Daesung Industrial Co is currently generating about -0.01 per unit of volatility. If you would invest  367,500  in Daesung Industrial Co on October 8, 2024 and sell it today you would lose (38,000) from holding Daesung Industrial Co or give up 10.34% of portfolio value over 90 days.

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

LG Display  vs.  Daesung Industrial Co

LG Display

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LG Display 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.

Daesung Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Daesung Industrial 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 LG Display and Daesung Industrial

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

The idea behind LG Display and Daesung Industrial 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..