Correlation Between LG Display and Utime

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

Diversification Opportunities for LG Display and Utime

-0.3

Correlation Coefficient

LG Display  Utime

Very good diversification

The 3 months correlation between LPL and Utime is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding LG Display Co and Utime in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Utime 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 Utime. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Utime has no effect on the direction of LG Display i.e., LG Display and Utime go up and down completely randomly.

Pair Corralation between LG Display and Utime

Considering the 90-day investment horizon LG Display Co is expected to under-perform the Utime. But the stock apears to be less risky and, when comparing its historical volatility, LG Display Co is 8.47 times less risky than Utime. The stock trades about -0.02 of its potential returns per unit of risk. The Utime is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  91.00  in Utime on September 17, 2024 and sell it today you would lose (36.00) from holding Utime or give up 39.56% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	28.97%
Values	Daily Returns

LG Display Co  vs.  Utime

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 weak performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Utime

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Utime has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound primary indicators, Utime is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with LG Display and Utime

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

The idea behind LG Display Co and Utime 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.