Correlation Between LG Display and WINDSTREAM HLDGS

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

Diversification Opportunities for LG Display and WINDSTREAM HLDGS

-0.08

Correlation Coefficient

LG Display  WINDSTREAM HLDGS

Good diversification

The 3 months correlation between LGA and WINDSTREAM is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding LG Display Co and WINDSTREAM HLDGS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WINDSTREAM HLDGS 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 WINDSTREAM HLDGS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WINDSTREAM HLDGS has no effect on the direction of LG Display i.e., LG Display and WINDSTREAM HLDGS go up and down completely randomly.

Pair Corralation between LG Display and WINDSTREAM HLDGS

Assuming the 90 days horizon LG Display Co is expected to under-perform the WINDSTREAM HLDGS. But the stock apears to be less risky and, when comparing its historical volatility, LG Display Co is 10.95 times less risky than WINDSTREAM HLDGS. The stock trades about -0.14 of its potential returns per unit of risk. The WINDSTREAM HLDGS is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  7.50  in WINDSTREAM HLDGS on September 24, 2024 and sell it today you would earn a total of  0.93  from holding WINDSTREAM HLDGS or generate 12.4% return on investment over 90 days.

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

LG Display Co  vs.  WINDSTREAM HLDGS

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.

WINDSTREAM HLDGS

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in WINDSTREAM HLDGS are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, WINDSTREAM HLDGS unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with LG Display and WINDSTREAM HLDGS

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

The idea behind LG Display Co and WINDSTREAM HLDGS 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.