Correlation Between Sabre Insurance and LG Display

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

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

Diversification Opportunities for Sabre Insurance and LG Display

0.25

Correlation Coefficient

Sabre Insurance  LG Display

Modest diversification

The 3 months correlation between Sabre and LGA is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Sabre Insurance Group and LG Display Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LG Display and Sabre Insurance 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 Sabre Insurance Group 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 Sabre Insurance i.e., Sabre Insurance and LG Display go up and down completely randomly.

Pair Corralation between Sabre Insurance and LG Display

Assuming the 90 days horizon Sabre Insurance Group is expected to generate 0.91 times more return on investment than LG Display. However, Sabre Insurance Group is 1.1 times less risky than LG Display. It trades about 0.05 of its potential returns per unit of risk. LG Display Co is currently generating about -0.03 per unit of risk. If you would invest  106.00  in Sabre Insurance Group on October 4, 2024 and sell it today you would earn a total of  58.00  from holding Sabre Insurance Group or generate 54.72% return on investment over 90 days.

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

Sabre Insurance Group  vs.  LG Display Co

Sabre Insurance Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sabre Insurance Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Sabre Insurance is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

LG Display

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Sabre Insurance and LG Display

The main advantage of trading using opposite Sabre Insurance and LG Display positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sabre Insurance 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 Sabre Insurance Group and LG Display Co 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.