Correlation Between Citigroup and LG Display

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

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

Diversification Opportunities for Citigroup and LG Display

0.83

Correlation Coefficient

Citigroup  LG Display

Very poor diversification

The 3 months correlation between Citigroup and LPL is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and LG Display Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LG Display and Citigroup 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 Citigroup 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 Citigroup i.e., Citigroup and LG Display go up and down completely randomly.

Pair Corralation between Citigroup and LG Display

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.73 times more return on investment than LG Display. However, Citigroup is 1.37 times less risky than LG Display. It trades about 0.06 of its potential returns per unit of risk. LG Display Co is currently generating about 0.02 per unit of risk. If you would invest  5,942  in Citigroup on June 21, 2024 and sell it today you would earn a total of  360.00  from holding Citigroup or generate 6.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.41%
Values	Daily Returns

Citigroup  vs.  LG Display Co

Citigroup

Risk-Adjusted Performance

4 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating fundamental indicators, Citigroup may actually be approaching a critical reversion point that can send shares even higher in October 2024.

LG Display

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in LG Display Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, LG Display is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Citigroup and LG Display

The main advantage of trading using opposite Citigroup and LG Display positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup 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 Citigroup 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.