Correlation Between LG Display and MOWI ASA

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

Diversification Opportunities for LG Display and MOWI ASA

-0.62

Correlation Coefficient

LG Display  MOWI ASA

Excellent diversification

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

Pair Corralation between LG Display and MOWI ASA

Assuming the 90 days horizon LG Display Co is expected to under-perform the MOWI ASA. In addition to that, LG Display is 1.42 times more volatile than MOWI ASA SPADR. It trades about -0.08 of its total potential returns per unit of risk. MOWI ASA SPADR is currently generating about 0.14 per unit of volatility. If you would invest  1,507  in MOWI ASA SPADR on September 5, 2024 and sell it today you would earn a total of  173.00  from holding MOWI ASA SPADR or generate 11.48% 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.  MOWI ASA SPADR

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 latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

MOWI ASA SPADR

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in MOWI ASA SPADR are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, MOWI ASA may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with LG Display and MOWI ASA

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

The idea behind LG Display Co and MOWI ASA SPADR 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.