Correlation Between LG Display and Xerox Corp

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

Diversification Opportunities for LG Display and Xerox Corp

0.49

Correlation Coefficient

LG Display  Xerox Corp

Very weak diversification

The 3 months correlation between LPL and Xerox is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding LG Display Co and Xerox Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xerox 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 Xerox Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xerox Corp has no effect on the direction of LG Display i.e., LG Display and Xerox Corp go up and down completely randomly.

Pair Corralation between LG Display and Xerox Corp

Considering the 90-day investment horizon LG Display Co is expected to under-perform the Xerox Corp. But the stock apears to be less risky and, when comparing its historical volatility, LG Display Co is 1.04 times less risky than Xerox Corp. The stock trades about -0.02 of its potential returns per unit of risk. The Xerox Corp is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  1,481  in Xerox Corp on January 31, 2024 and sell it today you would lose (95.00) from holding Xerox Corp or give up 6.41% 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.  Xerox 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 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.

Xerox Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Xerox Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in May 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with LG Display and Xerox Corp

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

The idea behind LG Display Co and Xerox 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 Commodity Directory module to find actively traded commodities issued by global exchanges.