Correlation Between Sony Corp and LG Display

Can any of the company-specific risk be diversified away by investing in both Sony Corp and LG Display 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 Sony Corp and LG Display into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Sony Corp and LG Display Co, you can compare the effects of market volatilities on Sony Corp and LG Display 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 Sony Corp with a short position of LG Display. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sony Corp and LG Display.

Diversification Opportunities for Sony Corp and LG Display

0.24

Correlation Coefficient

Sony Corp  LG Display

Modest diversification

The 3 months correlation between Sony and LPL is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Sony Corp and LG Display Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LG Display and Sony Corp 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 Sony Corp are associated (or correlated) with LG Display. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LG Display has no effect on the direction of Sony Corp i.e., Sony Corp and LG Display go up and down completely randomly.

Pair Corralation between Sony Corp and LG Display

Assuming the 90 days horizon Sony Corp is expected to generate 39.02 times more return on investment than LG Display. However, Sony Corp is 39.02 times more volatile than LG Display Co. It trades about 0.16 of its potential returns per unit of risk. LG Display Co is currently generating about -0.11 per unit of risk. If you would invest  9,483  in Sony Corp on August 30, 2024 and sell it today you would lose (7,410) from holding Sony Corp or give up 78.14% of portfolio value over 90 days.

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

Sony Corp  vs.  LG Display Co

Sony Corp

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sony Corp are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting forward-looking indicators, Sony Corp reported solid returns over the last few months and may actually be approaching a breakup point.

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 December 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Sony Corp and LG Display

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

The idea behind Sony Corp and LG Display Co 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.