Correlation Between IRobot and LG Display

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Can any of the company-specific risk be diversified away by investing in both IRobot 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 IRobot and LG Display into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between IRobot and LG Display Co, you can compare the effects of market volatilities on IRobot 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 IRobot with a short position of LG Display. Check out your portfolio center. Please also check ongoing floating volatility patterns of IRobot and LG Display.

Diversification Opportunities for IRobot and LG Display

0.81
  Correlation Coefficient

Very poor diversification

The 3 months correlation between IRobot and LPL is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding IRobot and LG Display Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LG Display and IRobot 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 IRobot 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 IRobot i.e., IRobot and LG Display go up and down completely randomly.

Pair Corralation between IRobot and LG Display

Given the investment horizon of 90 days IRobot is expected to under-perform the LG Display. In addition to that, IRobot is 1.45 times more volatile than LG Display Co. It trades about -0.08 of its total potential returns per unit of risk. LG Display Co is currently generating about -0.03 per unit of volatility. If you would invest  733.00  in LG Display Co on December 30, 2023 and sell it today you would lose (323.00) from holding LG Display Co or give up 44.07% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

IRobot  vs.  LG Display Co

 Performance 
       Timeline  
IRobot 

Risk-Adjusted Performance

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Over the last 90 days IRobot has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's fundamental drivers remain comparatively stable which may send shares a bit higher in April 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.
LG Display 

Risk-Adjusted Performance

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Low
 
High
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 unfluctuating performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in April 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

IRobot and LG Display Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with IRobot and LG Display

The main advantage of trading using opposite IRobot and LG Display positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IRobot 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 IRobot 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.

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