Correlation Between Vessel and LG Display

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

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

Diversification Opportunities for Vessel and LG Display

0.87

Correlation Coefficient

Vessel  LG Display

Very poor diversification

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

Pair Corralation between Vessel and LG Display

Assuming the 90 days trading horizon Vessel Co is expected to under-perform the LG Display. In addition to that, Vessel is 1.83 times more volatile than LG Display. It trades about -0.07 of its total potential returns per unit of risk. LG Display is currently generating about -0.12 per unit of volatility. If you would invest  1,024,000  in LG Display on October 7, 2024 and sell it today you would lose (105,000) from holding LG Display or give up 10.25% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	80.49%
Values	Daily Returns

Vessel Co  vs.  LG Display

Vessel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vessel Co 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.

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 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.

Pair Trading with Vessel and LG Display

The main advantage of trading using opposite Vessel and LG Display positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vessel 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 Vessel 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.