Correlation Between Worldex Industry and LG Display

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

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

Diversification Opportunities for Worldex Industry and LG Display

0.88

Correlation Coefficient

Worldex Industry  LG Display

Very poor diversification

The 3 months correlation between Worldex and 034220 is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Worldex Industry Trading and LG Display in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LG Display and Worldex Industry 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 Worldex Industry Trading 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 Worldex Industry i.e., Worldex Industry and LG Display go up and down completely randomly.

Pair Corralation between Worldex Industry and LG Display

Assuming the 90 days trading horizon Worldex Industry Trading is expected to generate 1.11 times more return on investment than LG Display. However, Worldex Industry is 1.11 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 -0.09 per unit of risk. If you would invest  1,932,924  in Worldex Industry Trading on October 8, 2024 and sell it today you would lose (224,924) from holding Worldex Industry Trading or give up 11.64% of portfolio value over 90 days.

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

Worldex Industry Trading  vs.  LG Display

Worldex Industry Trading

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Worldex Industry Trading 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.

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.

Pair Trading with Worldex Industry and LG Display

The main advantage of trading using opposite Worldex Industry and LG Display positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Worldex Industry 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 Worldex Industry Trading 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.