Correlation Between LG Display and Samsung Electronics

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

Diversification Opportunities for LG Display and Samsung Electronics

-0.01

Correlation Coefficient

LG Display  Samsung Electronics

Good diversification

The 3 months correlation between LPL and Samsung is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding LG Display Co and Samsung Electronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Samsung Electronics 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 Samsung Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Samsung Electronics has no effect on the direction of LG Display i.e., LG Display and Samsung Electronics go up and down completely randomly.

Pair Corralation between LG Display and Samsung Electronics

If you would invest  311.00  in LG Display Co on December 28, 2024 and sell it today you would earn a total of  12.00  from holding LG Display Co or generate 3.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

LG Display Co  vs.  Samsung Electronics Co

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.

Samsung Electronics

Risk-Adjusted Performance

Very Weak

Over the last 90 days Samsung Electronics Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable essential indicators, Samsung Electronics is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with LG Display and Samsung Electronics

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

The idea behind LG Display Co and Samsung Electronics Co 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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.