Correlation Between Samsung Electronics and Daou Tech

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

Diversification Opportunities for Samsung Electronics and Daou Tech

0.41

Correlation Coefficient

Samsung Electronics  Daou Tech

Very weak diversification

The 3 months correlation between Samsung and Daou is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Samsung Electronics Co and Daou Tech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daou Tech 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 Daou Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daou Tech has no effect on the direction of Samsung Electronics i.e., Samsung Electronics and Daou Tech go up and down completely randomly.

Pair Corralation between Samsung Electronics and Daou Tech

Assuming the 90 days trading horizon Samsung Electronics is expected to generate 1.33 times less return on investment than Daou Tech. In addition to that, Samsung Electronics is 1.35 times more volatile than Daou Tech. It trades about 0.11 of its total potential returns per unit of risk. Daou Tech is currently generating about 0.2 per unit of volatility. If you would invest  1,712,000  in Daou Tech on October 9, 2024 and sell it today you would earn a total of  84,000  from holding Daou Tech or generate 4.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	94.74%
Values	Daily Returns

Samsung Electronics Co  vs.  Daou Tech

Samsung Electronics

Risk-Adjusted Performance

0 of 100

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.

Daou Tech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Daou Tech has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Daou Tech 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 Daou Tech

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

The idea behind Samsung Electronics Co and Daou Tech 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.