Correlation Between Samsung Electronics and System

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

Diversification Opportunities for Samsung Electronics and System

0.24

Correlation Coefficient

Samsung Electronics  System

Modest diversification

The 3 months correlation between Samsung and System is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Samsung Electronics Co and System and Application in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on System and Application 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 System. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of System and Application has no effect on the direction of Samsung Electronics i.e., Samsung Electronics and System go up and down completely randomly.

Pair Corralation between Samsung Electronics and System

Assuming the 90 days trading horizon Samsung Electronics is expected to generate 5.68 times less return on investment than System. But when comparing it to its historical volatility, Samsung Electronics Co is 2.35 times less risky than System. It trades about 0.03 of its potential returns per unit of risk. System and Application is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  134,443  in System and Application on December 2, 2024 and sell it today you would earn a total of  19,557  from holding System and Application or generate 14.55% return on investment over 90 days.

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

Samsung Electronics Co  vs.  System and Application

Samsung Electronics

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Samsung Electronics Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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.

System and Application

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in System and Application are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, System sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Samsung Electronics and System

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

The idea behind Samsung Electronics Co and System and Application 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.