Correlation Between LG Display and Ceragon Networks

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

Diversification Opportunities for LG Display and Ceragon Networks

-0.46

Correlation Coefficient

LG Display  Ceragon Networks

Very good diversification

The 23 months correlation between LPL and Ceragon is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding LG Display Co and Ceragon Networks in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ceragon Networks 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 Ceragon Networks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ceragon Networks has no effect on the direction of LG Display i.e., LG Display and Ceragon Networks go up and down completely randomly.

Pair Corralation between LG Display and Ceragon Networks

Considering the 90-day investment horizon LG Display Co is expected to under-perform the Ceragon Networks. But the stock apears to be less risky and, when comparing its historical volatility, LG Display Co is 1.09 times less risky than Ceragon Networks. The stock trades about -0.03 of its potential returns per unit of risk. The Ceragon Networks is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  175.00  in Ceragon Networks on February 15, 2024 and sell it today you would earn a total of  95.00  from holding Ceragon Networks or generate 54.29% return on investment over 90 days.

Time Period	23 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

LG Display Co  vs.  Ceragon Networks

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 current stock price mess, may contribute to short-term losses for the institutional investors.

Ceragon Networks

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ceragon Networks are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Ceragon Networks is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with LG Display and Ceragon Networks

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

The idea behind LG Display Co and Ceragon Networks 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.