Correlation Between Sharp and LG Display

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

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

Diversification Opportunities for Sharp and LG Display

0.4

Correlation Coefficient

Sharp  LG Display

Very weak diversification

The 3 months correlation between Sharp and LPL is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Sharp and LG Display Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LG Display and Sharp 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 Sharp 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 Sharp i.e., Sharp and LG Display go up and down completely randomly.

Pair Corralation between Sharp and LG Display

Assuming the 90 days horizon Sharp is expected to generate 0.5 times more return on investment than LG Display. However, Sharp is 2.0 times less risky than LG Display. It trades about 0.13 of its potential returns per unit of risk. LG Display Co is currently generating about 0.01 per unit of risk. If you would invest  585.00  in Sharp on December 26, 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	98.36%
Values	Daily Returns

Sharp  vs.  LG Display Co

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.

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.

Pair Trading with Sharp and LG Display

The main advantage of trading using opposite Sharp and LG Display positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sharp 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 Sharp 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.