Correlation Between LG Display and Gladstone Commercial

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

Diversification Opportunities for LG Display and Gladstone Commercial

-0.77

Correlation Coefficient

LG Display  Gladstone Commercial

Pay attention - limited upside

The 3 months correlation between LGA and Gladstone is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding LG Display Co and Gladstone Commercial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gladstone Commercial 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 Gladstone Commercial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gladstone Commercial has no effect on the direction of LG Display i.e., LG Display and Gladstone Commercial go up and down completely randomly.

Pair Corralation between LG Display and Gladstone Commercial

Assuming the 90 days horizon LG Display Co is expected to under-perform the Gladstone Commercial. But the stock apears to be less risky and, when comparing its historical volatility, LG Display Co is 1.07 times less risky than Gladstone Commercial. The stock trades about -0.16 of its potential returns per unit of risk. The Gladstone Commercial is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  1,378  in Gladstone Commercial on September 23, 2024 and sell it today you would earn a total of  155.00  from holding Gladstone Commercial or generate 11.25% return on investment over 90 days.

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

LG Display Co  vs.  Gladstone Commercial

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 uncertain 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.

Gladstone Commercial

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Gladstone Commercial are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Gladstone Commercial may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with LG Display and Gladstone Commercial

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

The idea behind LG Display Co and Gladstone Commercial 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.