Correlation Between LG Display and Lion Biotechnologies

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

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

Diversification Opportunities for LG Display and Lion Biotechnologies

0.41

Correlation Coefficient

LG Display  Lion Biotechnologies

Very weak diversification

The 3 months correlation between LGA and Lion is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding LG Display Co and Lion Biotechnologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lion Biotechnologies and LG Display 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 LG Display Co are associated (or correlated) with Lion Biotechnologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lion Biotechnologies has no effect on the direction of LG Display i.e., LG Display and Lion Biotechnologies go up and down completely randomly.

Pair Corralation between LG Display and Lion Biotechnologies

Assuming the 90 days horizon LG Display Co is expected to under-perform the Lion Biotechnologies. But the stock apears to be less risky and, when comparing its historical volatility, LG Display Co is 2.43 times less risky than Lion Biotechnologies. The stock trades about -0.02 of its potential returns per unit of risk. The Lion Biotechnologies is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  605.00  in Lion Biotechnologies on September 23, 2024 and sell it today you would earn a total of  86.00  from holding Lion Biotechnologies or generate 14.21% return on investment over 90 days.

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

LG Display Co  vs.  Lion Biotechnologies

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 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.

Lion Biotechnologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lion Biotechnologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with LG Display and Lion Biotechnologies

The main advantage of trading using opposite LG Display and Lion Biotechnologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LG Display position performs unexpectedly, Lion Biotechnologies 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 Lion Biotechnologies will offset losses from the drop in Lion Biotechnologies' long position.

The idea behind LG Display Co and Lion Biotechnologies 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.