Correlation Between Samsung Electronics and Tae Kwang

Can any of the company-specific risk be diversified away by investing in both Samsung Electronics and Tae Kwang 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 Samsung Electronics and Tae Kwang into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Samsung Electronics Co and Tae Kwang, you can compare the effects of market volatilities on Samsung Electronics and Tae Kwang 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 Samsung Electronics with a short position of Tae Kwang. Check out your portfolio center. Please also check ongoing floating volatility patterns of Samsung Electronics and Tae Kwang.

Diversification Opportunities for Samsung Electronics and Tae Kwang

-0.54

Correlation Coefficient

Samsung Electronics  Tae Kwang

Excellent diversification

The 3 months correlation between Samsung and Tae is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Samsung Electronics Co and Tae Kwang in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tae Kwang and Samsung Electronics 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 Samsung Electronics Co are associated (or correlated) with Tae Kwang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tae Kwang has no effect on the direction of Samsung Electronics i.e., Samsung Electronics and Tae Kwang go up and down completely randomly.

Pair Corralation between Samsung Electronics and Tae Kwang

Assuming the 90 days trading horizon Samsung Electronics is expected to generate 13.47 times less return on investment than Tae Kwang. But when comparing it to its historical volatility, Samsung Electronics Co is 1.68 times less risky than Tae Kwang. It trades about 0.0 of its potential returns per unit of risk. Tae Kwang is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,456,421  in Tae Kwang on October 11, 2024 and sell it today you would earn a total of  349,579  from holding Tae Kwang or generate 24.0% return on investment over 90 days.

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

Samsung Electronics Co  vs.  Tae Kwang

Samsung Electronics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Samsung Electronics Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Samsung Electronics is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Tae Kwang

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Tae Kwang are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Tae Kwang sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Samsung Electronics and Tae Kwang

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

The idea behind Samsung Electronics Co and Tae Kwang 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.