Correlation Between Trimble and LG Display

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

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

Diversification Opportunities for Trimble and LG Display

-0.87

Correlation Coefficient

Trimble  LG Display

Pay attention - limited upside

The 3 months correlation between Trimble and LGA is -0.87. Overlapping area represents the amount of risk that can be diversified away by holding Trimble and LG Display Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LG Display and Trimble 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 Trimble 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 Trimble i.e., Trimble and LG Display go up and down completely randomly.

Pair Corralation between Trimble and LG Display

Assuming the 90 days horizon Trimble is expected to generate 1.47 times more return on investment than LG Display. However, Trimble is 1.47 times more volatile than LG Display Co. It trades about 0.18 of its potential returns per unit of risk. LG Display Co is currently generating about -0.12 per unit of risk. If you would invest  5,230  in Trimble on September 16, 2024 and sell it today you would earn a total of  1,754  from holding Trimble or generate 33.54% return on investment over 90 days.

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

Trimble  vs.  LG Display Co

Trimble

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Trimble are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Trimble 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 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 Trimble and LG Display

The main advantage of trading using opposite Trimble and LG Display positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Trimble 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 Trimble 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.