Correlation Between LG Display and Air Lease

Can any of the company-specific risk be diversified away by investing in both LG Display and Air Lease 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 Air Lease 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 Air Lease, you can compare the effects of market volatilities on LG Display and Air Lease 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 Air Lease. Check out your portfolio center. Please also check ongoing floating volatility patterns of LG Display and Air Lease.

Diversification Opportunities for LG Display and Air Lease

0.66

Correlation Coefficient

LG Display  Air Lease

Poor diversification

The 3 months correlation between LGA and Air is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding LG Display Co and Air Lease in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air Lease 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 Air Lease. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air Lease has no effect on the direction of LG Display i.e., LG Display and Air Lease go up and down completely randomly.

Pair Corralation between LG Display and Air Lease

Assuming the 90 days horizon LG Display Co is expected to under-perform the Air Lease. In addition to that, LG Display is 1.32 times more volatile than Air Lease. It trades about -0.02 of its total potential returns per unit of risk. Air Lease is currently generating about -0.01 per unit of volatility. If you would invest  4,638  in Air Lease on December 27, 2024 and sell it today you would lose (138.00) from holding Air Lease or give up 2.98% of portfolio value over 90 days.

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

LG Display Co  vs.  Air Lease

LG Display

Risk-Adjusted Performance

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 nearly stable basic indicators, LG Display is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Air Lease

Risk-Adjusted Performance

Very Weak

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

Pair Trading with LG Display and Air Lease

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

The idea behind LG Display Co and Air Lease 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.