Correlation Between Samsung Electronics and NH Investment

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

Diversification Opportunities for Samsung Electronics and NH Investment

0.15

Correlation Coefficient

Samsung Electronics  NH Investment

Average diversification

The 3 months correlation between Samsung and 005940 is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Samsung Electronics Co and NH Investment Securities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NH Investment Securities 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 NH Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NH Investment Securities has no effect on the direction of Samsung Electronics i.e., Samsung Electronics and NH Investment go up and down completely randomly.

Pair Corralation between Samsung Electronics and NH Investment

Assuming the 90 days trading horizon Samsung Electronics Co is expected to generate 1.45 times more return on investment than NH Investment. However, Samsung Electronics is 1.45 times more volatile than NH Investment Securities. It trades about 0.16 of its potential returns per unit of risk. NH Investment Securities is currently generating about 0.16 per unit of risk. If you would invest  4,180,000  in Samsung Electronics Co on December 4, 2024 and sell it today you would earn a total of  290,000  from holding Samsung Electronics Co or generate 6.94% return on investment over 90 days.

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

Samsung Electronics Co  vs.  NH Investment Securities

Samsung Electronics

Risk-Adjusted Performance

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.

NH Investment Securities

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in NH Investment Securities are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, NH Investment 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 NH Investment

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

The idea behind Samsung Electronics Co and NH Investment Securities 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.

Check out your portfolio center.

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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.