Correlation Between Aegean Airlines and LG Display

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

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

Diversification Opportunities for Aegean Airlines and LG Display

0.12

Correlation Coefficient

Aegean Airlines  LG Display

Average diversification

The 3 months correlation between Aegean and LGA is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Aegean Airlines SA and LG Display Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LG Display and Aegean Airlines 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 Aegean Airlines SA 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 Aegean Airlines i.e., Aegean Airlines and LG Display go up and down completely randomly.

Pair Corralation between Aegean Airlines and LG Display

Assuming the 90 days horizon Aegean Airlines is expected to generate 1.06 times less return on investment than LG Display. But when comparing it to its historical volatility, Aegean Airlines SA is 1.4 times less risky than LG Display. It trades about 0.18 of its potential returns per unit of risk. LG Display Co is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  298.00  in LG Display Co on October 10, 2024 and sell it today you would earn a total of  10.00  from holding LG Display Co or generate 3.36% return on investment over 90 days.

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

Aegean Airlines SA  vs.  LG Display Co

Aegean Airlines SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aegean Airlines SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Aegean Airlines is not utilizing all of its potentials. The latest 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 latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Aegean Airlines and LG Display

The main advantage of trading using opposite Aegean Airlines and LG Display positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aegean Airlines 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 Aegean Airlines SA 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.