Correlation Between LG Display and GoPro

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

Diversification Opportunities for LG Display and GoPro

0.0

Correlation Coefficient

LG Display  GoPro

Pay attention - limited upside

The 3 months correlation between LPL and GoPro is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding LG Display Co and GoPro Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GoPro Inc 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 GoPro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GoPro Inc has no effect on the direction of LG Display i.e., LG Display and GoPro go up and down completely randomly.

Pair Corralation between LG Display and GoPro

Considering the 90-day investment horizon LG Display Co is expected to under-perform the GoPro. But the stock apears to be less risky and, when comparing its historical volatility, LG Display Co is 1.79 times less risky than GoPro. The stock trades about -0.11 of its potential returns per unit of risk. The GoPro Inc is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  128.00  in GoPro Inc on August 30, 2024 and sell it today you would lose (9.00) from holding GoPro Inc or give up 7.03% of portfolio value over 90 days.

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

LG Display Co  vs.  GoPro Inc

LG Display

Risk-Adjusted Performance

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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 weak performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in December 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

GoPro Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GoPro Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, GoPro is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with LG Display and GoPro

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

The idea behind LG Display Co and GoPro Inc 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 Stocks Directory module to find actively traded stocks across global markets.