Correlation Between BIT Computer and LG Display

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

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

Diversification Opportunities for BIT Computer and LG Display

0.48

Correlation Coefficient

BIT Computer  LG Display

Very weak diversification

The 3 months correlation between BIT and 034220 is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding BIT Computer Co and LG Display Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LG Display and BIT Computer 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 BIT Computer Co 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 BIT Computer i.e., BIT Computer and LG Display go up and down completely randomly.

Pair Corralation between BIT Computer and LG Display

Assuming the 90 days trading horizon BIT Computer Co is expected to generate 1.06 times more return on investment than LG Display. However, BIT Computer is 1.06 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  523,000  in BIT Computer Co on September 28, 2024 and sell it today you would lose (27,000) from holding BIT Computer Co or give up 5.16% of portfolio value over 90 days.

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

BIT Computer Co  vs.  LG Display Co

BIT Computer

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BIT Computer Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, BIT Computer is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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 weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with BIT Computer and LG Display

The main advantage of trading using opposite BIT Computer and LG Display positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BIT Computer 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 BIT Computer Co 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.