Correlation Between LG Display and Sharp

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

Diversification Opportunities for LG Display and Sharp

0.46

Correlation Coefficient

LG Display  Sharp

Very weak diversification

The 3 months correlation between LPL and Sharp is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding LG Display Co and Sharp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sharp 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 Sharp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sharp has no effect on the direction of LG Display i.e., LG Display and Sharp go up and down completely randomly.

Pair Corralation between LG Display and Sharp

Considering the 90-day investment horizon LG Display Co is expected to under-perform the Sharp. In addition to that, LG Display is 2.14 times more volatile than Sharp. It trades about -0.03 of its total potential returns per unit of risk. Sharp is currently generating about 0.13 per unit of volatility. If you would invest  585.00  in Sharp on December 24, 2024 and sell it today you would earn a total of  42.00  from holding Sharp or generate 7.18% return on investment over 90 days.

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

LG Display Co  vs.  Sharp

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 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.

Sharp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sharp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Sharp may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with LG Display and Sharp

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

The idea behind LG Display Co and Sharp 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.