Correlation Between LG Display and Amarin PLC

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

Diversification Opportunities for LG Display and Amarin PLC

0.52

Correlation Coefficient

LG Display  Amarin PLC

Very weak diversification

The 3 months correlation between LPL and Amarin is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding LG Display Co and Amarin PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amarin PLC 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 Amarin PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amarin PLC has no effect on the direction of LG Display i.e., LG Display and Amarin PLC go up and down completely randomly.

Pair Corralation between LG Display and Amarin PLC

Considering the 90-day investment horizon LG Display Co is expected to generate 0.54 times more return on investment than Amarin PLC. However, LG Display Co is 1.86 times less risky than Amarin PLC. It trades about -0.02 of its potential returns per unit of risk. Amarin PLC is currently generating about -0.01 per unit of risk. If you would invest  580.00  in LG Display Co on March 14, 2024 and sell it today you would lose (224.00) from holding LG Display Co or give up 38.62% of portfolio value over 90 days.

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

LG Display Co  vs.  Amarin PLC

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

Amarin PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Amarin PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Amarin PLC is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with LG Display and Amarin PLC

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

The idea behind LG Display Co and Amarin PLC 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.