Correlation Between LG Display and NH SPAC

Can any of the company-specific risk be diversified away by investing in both LG Display and NH SPAC 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 NH SPAC 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 NH SPAC 8, you can compare the effects of market volatilities on LG Display and NH SPAC 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 NH SPAC. Check out your portfolio center. Please also check ongoing floating volatility patterns of LG Display and NH SPAC.

Diversification Opportunities for LG Display and NH SPAC

0.48

Correlation Coefficient

LG Display  NH SPAC

Very weak diversification

The 3 months correlation between 034220 and 225570 is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding LG Display Co and NH SPAC 8 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NH SPAC 8 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 NH SPAC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NH SPAC 8 has no effect on the direction of LG Display i.e., LG Display and NH SPAC go up and down completely randomly.

Pair Corralation between LG Display and NH SPAC

Assuming the 90 days trading horizon LG Display Co is expected to generate 0.78 times more return on investment than NH SPAC. However, LG Display Co is 1.28 times less risky than NH SPAC. It trades about -0.02 of its potential returns per unit of risk. NH SPAC 8 is currently generating about -0.04 per unit of risk. If you would invest  960,000  in LG Display Co on December 23, 2024 and sell it today you would lose (24,000) from holding LG Display Co or give up 2.5% of portfolio value over 90 days.

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

LG Display Co  vs.  NH SPAC 8

LG Display

Risk-Adjusted Performance

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 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.

NH SPAC 8

Risk-Adjusted Performance

Very Weak

Over the last 90 days NH SPAC 8 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, NH SPAC 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 NH SPAC

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

The idea behind LG Display Co and NH SPAC 8 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.