Correlation Between Samsung Electronics and Korea Refractories

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

Diversification Opportunities for Samsung Electronics and Korea Refractories

-0.14

Correlation Coefficient

Samsung Electronics  Korea Refractories

Good diversification

The 3 months correlation between Samsung and Korea is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Samsung Electronics Co and Korea Refractories Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Korea Refractories 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 Korea Refractories. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Korea Refractories has no effect on the direction of Samsung Electronics i.e., Samsung Electronics and Korea Refractories go up and down completely randomly.

Pair Corralation between Samsung Electronics and Korea Refractories

Assuming the 90 days trading horizon Samsung Electronics Co is expected to under-perform the Korea Refractories. In addition to that, Samsung Electronics is 1.32 times more volatile than Korea Refractories Co. It trades about 0.0 of its total potential returns per unit of risk. Korea Refractories Co is currently generating about 0.07 per unit of volatility. If you would invest  204,686  in Korea Refractories Co on December 2, 2024 and sell it today you would earn a total of  11,314  from holding Korea Refractories Co or generate 5.53% return on investment over 90 days.

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

Samsung Electronics Co  vs.  Korea Refractories Co

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.

Korea Refractories

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Korea Refractories Co are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Korea Refractories may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Samsung Electronics and Korea Refractories

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

The idea behind Samsung Electronics Co and Korea Refractories 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.