Correlation Between LG Display and Skechers USA

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

Diversification Opportunities for LG Display and Skechers USA

-0.19

Correlation Coefficient

LG Display  Skechers USA

Good diversification

The 3 months correlation between LPL and Skechers is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding LG Display Co and Skechers USA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Skechers USA 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 Skechers USA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Skechers USA has no effect on the direction of LG Display i.e., LG Display and Skechers USA go up and down completely randomly.

Pair Corralation between LG Display and Skechers USA

Considering the 90-day investment horizon LG Display Co is expected to generate 0.77 times more return on investment than Skechers USA. However, LG Display Co is 1.3 times less risky than Skechers USA. It trades about 0.04 of its potential returns per unit of risk. Skechers USA is currently generating about -0.07 per unit of risk. If you would invest  315.00  in LG Display Co on December 18, 2024 and sell it today you would earn a total of  12.00  from holding LG Display Co or generate 3.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

LG Display Co  vs.  Skechers USA

LG Display

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in LG Display Co are ranked lower than 3 (%) 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.

Skechers USA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Skechers USA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's forward-looking signals remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with LG Display and Skechers USA

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

The idea behind LG Display Co and Skechers USA 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.