Correlation Between LG Display and Petroleo Brasileiro

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

Diversification Opportunities for LG Display and Petroleo Brasileiro

0.34

Correlation Coefficient

LG Display  Petroleo Brasileiro

Weak diversification

The 3 months correlation between LPL and Petroleo is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding LG Display Co and Petroleo Brasileiro Petrobras in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Petroleo Brasileiro 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 Petroleo Brasileiro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Petroleo Brasileiro has no effect on the direction of LG Display i.e., LG Display and Petroleo Brasileiro go up and down completely randomly.

Pair Corralation between LG Display and Petroleo Brasileiro

Considering the 90-day investment horizon LG Display Co is expected to under-perform the Petroleo Brasileiro. In addition to that, LG Display is 1.32 times more volatile than Petroleo Brasileiro Petrobras. It trades about -0.06 of its total potential returns per unit of risk. Petroleo Brasileiro Petrobras is currently generating about 0.04 per unit of volatility. If you would invest  1,045  in Petroleo Brasileiro Petrobras on October 4, 2024 and sell it today you would earn a total of  269.50  from holding Petroleo Brasileiro Petrobras or generate 25.79% return on investment over 90 days.

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

LG Display Co  vs.  Petroleo Brasileiro Petrobras

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 weak performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Petroleo Brasileiro

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Petroleo Brasileiro Petrobras has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest unsteady performance, the Stock's fundamental drivers remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with LG Display and Petroleo Brasileiro

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

The idea behind LG Display Co and Petroleo Brasileiro Petrobras 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.