Correlation Between PROSIEBENSAT1 MEDIADR4/ and LG Display

Can any of the company-specific risk be diversified away by investing in both PROSIEBENSAT1 MEDIADR4/ and LG Display 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 PROSIEBENSAT1 MEDIADR4/ and LG Display into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between PROSIEBENSAT1 MEDIADR4 and LG Display Co, you can compare the effects of market volatilities on PROSIEBENSAT1 MEDIADR4/ and LG Display 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 PROSIEBENSAT1 MEDIADR4/ with a short position of LG Display. Check out your portfolio center. Please also check ongoing floating volatility patterns of PROSIEBENSAT1 MEDIADR4/ and LG Display.

Diversification Opportunities for PROSIEBENSAT1 MEDIADR4/ and LG Display

0.55

Correlation Coefficient

PROSIEBENSAT1 MEDIADR4/  LG Display

Very weak diversification

The 3 months correlation between PROSIEBENSAT1 and LGA is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding PROSIEBENSAT1 MEDIADR4 and LG Display Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LG Display and PROSIEBENSAT1 MEDIADR4/ 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 PROSIEBENSAT1 MEDIADR4 are associated (or correlated) with LG Display. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LG Display has no effect on the direction of PROSIEBENSAT1 MEDIADR4/ i.e., PROSIEBENSAT1 MEDIADR4/ and LG Display go up and down completely randomly.

Pair Corralation between PROSIEBENSAT1 MEDIADR4/ and LG Display

Assuming the 90 days trading horizon PROSIEBENSAT1 MEDIADR4 is expected to generate 1.52 times more return on investment than LG Display. However, PROSIEBENSAT1 MEDIADR4/ is 1.52 times more volatile than LG Display Co. It trades about 0.03 of its potential returns per unit of risk. LG Display Co is currently generating about -0.12 per unit of risk. If you would invest  128.00  in PROSIEBENSAT1 MEDIADR4 on September 15, 2024 and sell it today you would earn a total of  4.00  from holding PROSIEBENSAT1 MEDIADR4 or generate 3.13% return on investment over 90 days.

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

PROSIEBENSAT1 MEDIADR4  vs.  LG Display Co

PROSIEBENSAT1 MEDIADR4/

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in PROSIEBENSAT1 MEDIADR4 are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable primary indicators, PROSIEBENSAT1 MEDIADR4/ is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

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 fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with PROSIEBENSAT1 MEDIADR4/ and LG Display

The main advantage of trading using opposite PROSIEBENSAT1 MEDIADR4/ and LG Display positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PROSIEBENSAT1 MEDIADR4/ position performs unexpectedly, LG Display 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 LG Display will offset losses from the drop in LG Display's long position.

The idea behind PROSIEBENSAT1 MEDIADR4 and LG Display 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.