Correlation Between BII Railway and LG Display

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

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

Diversification Opportunities for BII Railway and LG Display

0.86

Correlation Coefficient

BII Railway  LG Display

Very poor diversification

The 3 months correlation between BII and LGA is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding BII Railway Transportation and LG Display Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LG Display and BII Railway 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 BII Railway Transportation 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 BII Railway i.e., BII Railway and LG Display go up and down completely randomly.

Pair Corralation between BII Railway and LG Display

Assuming the 90 days horizon BII Railway Transportation is expected to generate 0.8 times more return on investment than LG Display. However, BII Railway Transportation is 1.25 times less risky than LG Display. It trades about 0.01 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  2.85  in BII Railway Transportation on March 8, 2025 and sell it today you would earn a total of  0.00  from holding BII Railway Transportation or generate 0.0% return on investment over 90 days.

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

BII Railway Transportation  vs.  LG Display Co

BII Railway Transpor

Risk-Adjusted Performance

Very Weak

Over the last 90 days BII Railway Transportation has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, BII Railway is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

LG Display

Risk-Adjusted Performance

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 nearly stable basic indicators, LG Display is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with BII Railway and LG Display

The main advantage of trading using opposite BII Railway and LG Display positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BII Railway 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 BII Railway Transportation 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..