Correlation Between FARO Technologies and LG Display
Can any of the company-specific risk be diversified away by investing in both FARO Technologies 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 FARO Technologies and LG Display into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between FARO Technologies and LG Display Co, you can compare the effects of market volatilities on FARO Technologies 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 FARO Technologies with a short position of LG Display. Check out your portfolio center. Please also check ongoing floating volatility patterns of FARO Technologies and LG Display.
Diversification Opportunities for FARO Technologies and LG Display
-0.85 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between FARO and LGA is -0.85. Overlapping area represents the amount of risk that can be diversified away by holding FARO Technologies and LG Display Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LG Display and FARO Technologies 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 FARO Technologies 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 FARO Technologies i.e., FARO Technologies and LG Display go up and down completely randomly.
Pair Corralation between FARO Technologies and LG Display
Assuming the 90 days horizon FARO Technologies is expected to generate 1.67 times more return on investment than LG Display. However, FARO Technologies is 1.67 times more volatile than LG Display Co. It trades about 0.02 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 2,710 in FARO Technologies on September 23, 2024 and sell it today you would lose (270.00) from holding FARO Technologies or give up 9.96% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
FARO Technologies vs. LG Display Co
Performance |
Timeline |
FARO Technologies |
LG Display |
FARO Technologies and LG Display Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with FARO Technologies and LG Display
The main advantage of trading using opposite FARO Technologies and LG Display positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FARO Technologies 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.FARO Technologies vs. Verizon Communications | FARO Technologies vs. COMBA TELECOM SYST | FARO Technologies vs. Diamyd Medical AB | FARO Technologies vs. CompuGroup Medical SE |
LG Display vs. Apple Inc | LG Display vs. Apple Inc | LG Display vs. Samsung Electronics Co | LG Display vs. Samsung Electronics Co |
Check out your portfolio center.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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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