Correlation Between LG Display and Retail Estates

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

Diversification Opportunities for LG Display and Retail Estates

0.71

Correlation Coefficient

LG Display  Retail Estates

Poor diversification

The 3 months correlation between LGA and Retail is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding LG Display Co and Retail Estates NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Retail Estates NV 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 Retail Estates. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Retail Estates NV has no effect on the direction of LG Display i.e., LG Display and Retail Estates go up and down completely randomly.

Pair Corralation between LG Display and Retail Estates

Assuming the 90 days horizon LG Display Co is expected to under-perform the Retail Estates. In addition to that, LG Display is 1.79 times more volatile than Retail Estates NV. It trades about -0.08 of its total potential returns per unit of risk. Retail Estates NV is currently generating about -0.13 per unit of volatility. If you would invest  6,440  in Retail Estates NV on September 1, 2024 and sell it today you would lose (580.00) from holding Retail Estates NV or give up 9.01% of portfolio value over 90 days.

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

LG Display Co  vs.  Retail Estates NV

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 uncertain 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.

Retail Estates NV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Retail Estates NV 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.

Pair Trading with LG Display and Retail Estates

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

The idea behind LG Display Co and Retail Estates NV 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.