Correlation Between LG Display and Sony Corp

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

Diversification Opportunities for LG Display and Sony Corp

0.81

Correlation Coefficient

LG Display  Sony Corp

Very poor diversification

The 3 months correlation between LPL and Sony is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding LG Display Co and Sony Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sony Corp 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 Sony Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sony Corp has no effect on the direction of LG Display i.e., LG Display and Sony Corp go up and down completely randomly.

Pair Corralation between LG Display and Sony Corp

Considering the 90-day investment horizon LG Display Co is expected to generate 1.89 times more return on investment than Sony Corp. However, LG Display is 1.89 times more volatile than Sony Corp. It trades about -0.12 of its potential returns per unit of risk. Sony Corp is currently generating about -0.31 per unit of risk. If you would invest  420.00  in LG Display Co on January 30, 2024 and sell it today you would lose (25.00) from holding LG Display Co or give up 5.95% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.45%
Values	Daily Returns

LG Display Co  vs.  Sony Corp

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 weak performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Sony Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sony Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's forward-looking indicators remain nearly stable which may send shares a bit higher in May 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with LG Display and Sony Corp

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

The idea behind LG Display Co and Sony Corp 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.