Correlation Between LG Display and OCI

Can any of the company-specific risk be diversified away by investing in both LG Display and OCI 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 OCI 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 OCI Co, you can compare the effects of market volatilities on LG Display and OCI 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 OCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of LG Display and OCI.

Diversification Opportunities for LG Display and OCI

0.72

Correlation Coefficient

LG Display  OCI

Poor diversification

The 3 months correlation between 034220 and OCI is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding LG Display Co and OCI Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OCI Co 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 OCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of OCI Co has no effect on the direction of LG Display i.e., LG Display and OCI go up and down completely randomly.

Pair Corralation between LG Display and OCI

Assuming the 90 days trading horizon LG Display is expected to generate 5.39 times less return on investment than OCI. But when comparing it to its historical volatility, LG Display Co is 2.09 times less risky than OCI. It trades about 0.13 of its potential returns per unit of risk. OCI Co is currently generating about 0.34 of returns per unit of risk over similar time horizon. If you would invest  5,490,000  in OCI Co on October 10, 2024 and sell it today you would earn a total of  1,800,000  from holding OCI Co or generate 32.79% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.0%
Values	Daily Returns

LG Display Co  vs.  OCI Co

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.

OCI Co

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in OCI Co are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, OCI may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with LG Display and OCI

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

The idea behind LG Display Co and OCI 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.