Correlation Between MS Autotech and LG Display

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

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

Diversification Opportunities for MS Autotech and LG Display

0.87

Correlation Coefficient

MS Autotech  LG Display

Very poor diversification

The 3 months correlation between 123040 and 034220 is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding MS Autotech CoLtd and LG Display in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LG Display and MS Autotech 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 MS Autotech CoLtd 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 MS Autotech i.e., MS Autotech and LG Display go up and down completely randomly.

Pair Corralation between MS Autotech and LG Display

Assuming the 90 days trading horizon MS Autotech CoLtd is expected to under-perform the LG Display. But the stock apears to be less risky and, when comparing its historical volatility, MS Autotech CoLtd is 1.02 times less risky than LG Display. The stock trades about -0.19 of its potential returns per unit of risk. The LG Display is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  1,025,000  in LG Display on September 4, 2024 and sell it today you would lose (45,000) from holding LG Display or give up 4.39% of portfolio value over 90 days.

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

MS Autotech CoLtd  vs.  LG Display

MS Autotech CoLtd

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MS Autotech CoLtd 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 January 2025. The current disturbance may also be a sign of long term up-swing 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 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 MS Autotech and LG Display

The main advantage of trading using opposite MS Autotech and LG Display positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MS Autotech 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 MS Autotech CoLtd 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.