Correlation Between Okins Electronics and LG Display

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

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

Diversification Opportunities for Okins Electronics and LG Display

0.26

Correlation Coefficient

Okins Electronics  LG Display

Modest diversification

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

Pair Corralation between Okins Electronics and LG Display

Assuming the 90 days trading horizon Okins Electronics Co is expected to generate 3.39 times more return on investment than LG Display. However, Okins Electronics is 3.39 times more volatile than LG Display. It trades about 0.08 of its potential returns per unit of risk. LG Display is currently generating about 0.01 per unit of risk. If you would invest  443,000  in Okins Electronics Co on December 29, 2024 and sell it today you would earn a total of  91,000  from holding Okins Electronics Co or generate 20.54% return on investment over 90 days.

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

Okins Electronics Co  vs.  LG Display

Okins Electronics

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Okins Electronics Co are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Okins Electronics sustained solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Okins Electronics and LG Display

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

The idea behind Okins Electronics Co and LG Display 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.