Correlation Between Samsung Electronics and Hwasung Industrial

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

Diversification Opportunities for Samsung Electronics and Hwasung Industrial

-0.22

Correlation Coefficient

Samsung Electronics  Hwasung Industrial

Very good diversification

The 3 months correlation between Samsung and Hwasung is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Samsung Electronics Co and Hwasung Industrial Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hwasung Industrial 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 Hwasung Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hwasung Industrial has no effect on the direction of Samsung Electronics i.e., Samsung Electronics and Hwasung Industrial go up and down completely randomly.

Pair Corralation between Samsung Electronics and Hwasung Industrial

Assuming the 90 days trading horizon Samsung Electronics Co is expected to generate 1.88 times more return on investment than Hwasung Industrial. However, Samsung Electronics is 1.88 times more volatile than Hwasung Industrial Co. It trades about 0.11 of its potential returns per unit of risk. Hwasung Industrial Co is currently generating about 0.02 per unit of risk. If you would invest  4,428,600  in Samsung Electronics Co on December 26, 2024 and sell it today you would earn a total of  496,400  from holding Samsung Electronics Co or generate 11.21% 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.  Hwasung Industrial Co

Samsung Electronics

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Samsung Electronics Co are ranked lower than 8 (%) 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.

Hwasung Industrial

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Hwasung Industrial Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Hwasung Industrial 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 Hwasung Industrial

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

The idea behind Samsung Electronics Co and Hwasung Industrial 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.