Correlation Between Immersion and LG Display

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

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

Diversification Opportunities for Immersion and LG Display

-0.16

Correlation Coefficient

Immersion  LG Display

Good diversification

The 3 months correlation between Immersion and LPL is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Immersion and LG Display Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LG Display and Immersion 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 Immersion 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 Immersion i.e., Immersion and LG Display go up and down completely randomly.

Pair Corralation between Immersion and LG Display

Given the investment horizon of 90 days Immersion is expected to under-perform the LG Display. But the stock apears to be less risky and, when comparing its historical volatility, Immersion is 1.78 times less risky than LG Display. The stock trades about -0.14 of its potential returns per unit of risk. The LG Display Co is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  420.00  in LG Display Co on January 31, 2024 and sell it today you would lose (14.00) from holding LG Display Co or give up 3.33% of portfolio value over 90 days.

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

Immersion  vs.  LG Display Co

Immersion

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Immersion are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting primary indicators, Immersion may actually be approaching a critical reversion point that can send shares even higher in May 2024.

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 quite persistent basic indicators, LG Display is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Immersion and LG Display

The main advantage of trading using opposite Immersion and LG Display positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Immersion 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 Immersion 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.