Correlation Between LG Display and Japan Steel

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

Diversification Opportunities for LG Display and Japan Steel

0.81

Correlation Coefficient

LG Display  Japan Steel

Very poor diversification

The 3 months correlation between LGA and Japan is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding LG Display Co and The Japan Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Japan Steel 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 Japan Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Japan Steel has no effect on the direction of LG Display i.e., LG Display and Japan Steel go up and down completely randomly.

Pair Corralation between LG Display and Japan Steel

Assuming the 90 days horizon LG Display Co is expected to under-perform the Japan Steel. But the stock apears to be less risky and, when comparing its historical volatility, LG Display Co is 1.28 times less risky than Japan Steel. The stock trades about -0.03 of its potential returns per unit of risk. The The Japan Steel is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  1,771  in The Japan Steel on April 24, 2025 and sell it today you would earn a total of  3,329  from holding The Japan Steel or generate 187.97% return on investment over 90 days.

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

LG Display Co  vs.  The Japan Steel

LG Display

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in LG Display Co are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, LG Display reported solid returns over the last few months and may actually be approaching a breakup point.

Japan Steel

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in The Japan Steel are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Japan Steel reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with LG Display and Japan Steel

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

The idea behind LG Display Co and The Japan Steel 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..