Correlation Between LG Display and Madison Square

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

Diversification Opportunities for LG Display and Madison Square

0.4

Correlation Coefficient

LG Display  Madison Square

Very weak diversification

The 3 months correlation between LGA and Madison is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding LG Display Co and Madison Square Garden in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Madison Square Garden 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 Madison Square. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Madison Square Garden has no effect on the direction of LG Display i.e., LG Display and Madison Square go up and down completely randomly.

Pair Corralation between LG Display and Madison Square

Assuming the 90 days horizon LG Display Co is expected to generate 1.7 times more return on investment than Madison Square. However, LG Display is 1.7 times more volatile than Madison Square Garden. It trades about -0.01 of its potential returns per unit of risk. Madison Square Garden is currently generating about -0.14 per unit of risk. If you would invest  300.00  in LG Display Co on December 28, 2024 and sell it today you would lose (10.00) from holding LG Display Co or give up 3.33% of portfolio value over 90 days.

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

LG Display Co  vs.  Madison Square Garden

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 current stock price disturbance, may contribute to mid-run losses for the stockholders.

Madison Square Garden

Risk-Adjusted Performance

Very Weak

Over the last 90 days Madison Square Garden 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 April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with LG Display and Madison Square

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

The idea behind LG Display Co and Madison Square Garden 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.