Correlation Between LG Display and Arlo Technologies

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

Diversification Opportunities for LG Display and Arlo Technologies

-0.07

Correlation Coefficient

LG Display  Arlo Technologies

Good diversification

The 3 months correlation between LPL and Arlo is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding LG Display Co and Arlo Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arlo Technologies 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 Arlo Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arlo Technologies has no effect on the direction of LG Display i.e., LG Display and Arlo Technologies go up and down completely randomly.

Pair Corralation between LG Display and Arlo Technologies

Considering the 90-day investment horizon LG Display Co is expected to generate 0.51 times more return on investment than Arlo Technologies. However, LG Display Co is 1.96 times less risky than Arlo Technologies. It trades about 0.03 of its potential returns per unit of risk. Arlo Technologies is currently generating about -0.04 per unit of risk. If you would invest  312.00  in LG Display Co on December 17, 2024 and sell it today you would earn a total of  7.00  from holding LG Display Co or generate 2.24% return on investment over 90 days.

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

LG Display Co  vs.  Arlo Technologies

LG Display

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in LG Display Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, LG Display is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Arlo Technologies

Risk-Adjusted Performance

Very Weak

Over the last 90 days Arlo Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's essential indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with LG Display and Arlo Technologies

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

The idea behind LG Display Co and Arlo Technologies 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .