Correlation Between Samsung Electronics and WISE ITech

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

Diversification Opportunities for Samsung Electronics and WISE ITech

0.38

Correlation Coefficient

Samsung Electronics  WISE ITech

Weak diversification

The 3 months correlation between Samsung and WISE is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Samsung Electronics Co and WISE iTech Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WISE iTech 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 WISE ITech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WISE iTech has no effect on the direction of Samsung Electronics i.e., Samsung Electronics and WISE ITech go up and down completely randomly.

Pair Corralation between Samsung Electronics and WISE ITech

Assuming the 90 days trading horizon Samsung Electronics is expected to generate 2.67 times less return on investment than WISE ITech. But when comparing it to its historical volatility, Samsung Electronics Co is 3.06 times less risky than WISE ITech. It trades about 0.14 of its potential returns per unit of risk. WISE iTech Co is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  528,545  in WISE iTech Co on December 24, 2024 and sell it today you would earn a total of  176,455  from holding WISE iTech Co or generate 33.39% return on investment over 90 days.

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

Samsung Electronics Co  vs.  WISE iTech 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 10 (%) 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.

WISE iTech

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in WISE iTech Co are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, WISE ITech sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Samsung Electronics and WISE ITech

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

The idea behind Samsung Electronics Co and WISE iTech 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.