Correlation Between E Investment and LG Display

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Can any of the company-specific risk be diversified away by investing in both E Investment 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 E Investment and LG Display into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between E Investment Development and LG Display, you can compare the effects of market volatilities on E Investment 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 E Investment with a short position of LG Display. Check out your portfolio center. Please also check ongoing floating volatility patterns of E Investment and LG Display.

Diversification Opportunities for E Investment and LG Display

0.0
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between 093230 and 034220 is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding E Investment Development and LG Display in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LG Display and E Investment 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 E Investment Development 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 E Investment i.e., E Investment and LG Display go up and down completely randomly.

Pair Corralation between E Investment and LG Display

Assuming the 90 days trading horizon E Investment Development is expected to generate 1.65 times more return on investment than LG Display. However, E Investment is 1.65 times more volatile than LG Display. It trades about 0.04 of its potential returns per unit of risk. LG Display is currently generating about -0.03 per unit of risk. If you would invest  90,700  in E Investment Development on October 24, 2024 and sell it today you would earn a total of  48,500  from holding E Investment Development or generate 53.47% return on investment over 90 days.
Time Period3 Months [change]
DirectionFlat 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

E Investment Development  vs.  LG Display

 Performance 
       Timeline  
E Investment Development 

Risk-Adjusted Performance

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Over the last 90 days E Investment Development has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, E Investment is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
LG Display 

Risk-Adjusted Performance

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Weak
 
Strong
Very Weak
Over the last 90 days LG Display has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

E Investment and LG Display Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with E Investment and LG Display

The main advantage of trading using opposite E Investment and LG Display positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if E Investment 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 E Investment Development 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.

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