Correlation Between JD SPORTS and LG Display

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

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

Diversification Opportunities for JD SPORTS and LG Display

0.78

Correlation Coefficient

JD SPORTS  LG Display

Poor diversification

The 3 months correlation between 9JD and LGA is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding JD SPORTS FASH and LG Display Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LG Display and JD SPORTS 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 JD SPORTS FASH 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 JD SPORTS i.e., JD SPORTS and LG Display go up and down completely randomly.

Pair Corralation between JD SPORTS and LG Display

Assuming the 90 days horizon JD SPORTS FASH is expected to generate 1.29 times more return on investment than LG Display. However, JD SPORTS is 1.29 times more volatile than LG Display Co. It trades about 0.01 of its potential returns per unit of risk. LG Display Co is currently generating about -0.02 per unit of risk. If you would invest  138.00  in JD SPORTS FASH on September 5, 2024 and sell it today you would lose (17.00) from holding JD SPORTS FASH or give up 12.32% of portfolio value over 90 days.

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

JD SPORTS FASH  vs.  LG Display Co

JD SPORTS FASH

Risk-Adjusted Performance

0 of 100

Very Weak

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

The main advantage of trading using opposite JD SPORTS and LG Display positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JD SPORTS 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 JD SPORTS FASH 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.