Correlation Between Samsung Electronics and IQuest

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

Diversification Opportunities for Samsung Electronics and IQuest

-0.21

Correlation Coefficient

Samsung Electronics  IQuest

Very good diversification

The 3 months correlation between Samsung and IQuest is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Samsung Electronics Co and IQuest Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IQuest 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 IQuest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IQuest has no effect on the direction of Samsung Electronics i.e., Samsung Electronics and IQuest go up and down completely randomly.

Pair Corralation between Samsung Electronics and IQuest

Assuming the 90 days trading horizon Samsung Electronics Co is expected to generate 1.12 times more return on investment than IQuest. However, Samsung Electronics is 1.12 times more volatile than IQuest Co. It trades about 0.14 of its potential returns per unit of risk. IQuest Co is currently generating about 0.01 per unit of risk. If you would invest  5,370,000  in Samsung Electronics Co on December 27, 2024 and sell it today you would earn a total of  770,000  from holding Samsung Electronics Co or generate 14.34% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.28%
Values	Daily Returns

Samsung Electronics Co  vs.  IQuest Co

Samsung Electronics

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Samsung Electronics Co are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Samsung Electronics sustained solid returns over the last few months and may actually be approaching a breakup point.

IQuest

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Samsung Electronics and IQuest

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

The idea behind Samsung Electronics Co and IQuest 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.