Correlation Between LG Display and BRIDGETEC Corp

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

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

Diversification Opportunities for LG Display and BRIDGETEC Corp

0.62

Correlation Coefficient

LG Display  BRIDGETEC Corp

Poor diversification

The 3 months correlation between 034220 and BRIDGETEC is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding LG Display and BRIDGETEC Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BRIDGETEC Corp 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 are associated (or correlated) with BRIDGETEC Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BRIDGETEC Corp has no effect on the direction of LG Display i.e., LG Display and BRIDGETEC Corp go up and down completely randomly.

Pair Corralation between LG Display and BRIDGETEC Corp

Assuming the 90 days trading horizon LG Display is expected to under-perform the BRIDGETEC Corp. But the stock apears to be less risky and, when comparing its historical volatility, LG Display is 1.57 times less risky than BRIDGETEC Corp. The stock trades about -0.07 of its potential returns per unit of risk. The BRIDGETEC Corp is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  482,000  in BRIDGETEC Corp on September 15, 2024 and sell it today you would earn a total of  79,000  from holding BRIDGETEC Corp or generate 16.39% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.65%
Values	Daily Returns

LG Display  vs.  BRIDGETEC Corp

LG Display

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LG Display 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.

BRIDGETEC Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BRIDGETEC Corp 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 LG Display and BRIDGETEC Corp

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

The idea behind LG Display and BRIDGETEC Corp 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.