Correlation Between Samsung Electronics and DONGKUK STEEL

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

Diversification Opportunities for Samsung Electronics and DONGKUK STEEL

0.24

Correlation Coefficient

Samsung Electronics  DONGKUK STEEL

Modest diversification

The 3 months correlation between Samsung and DONGKUK is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Samsung Electronics Co and DONGKUK STEEL MILL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DONGKUK STEEL MILL 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 DONGKUK STEEL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DONGKUK STEEL MILL has no effect on the direction of Samsung Electronics i.e., Samsung Electronics and DONGKUK STEEL go up and down completely randomly.

Pair Corralation between Samsung Electronics and DONGKUK STEEL

Assuming the 90 days trading horizon Samsung Electronics Co is expected to under-perform the DONGKUK STEEL. But the stock apears to be less risky and, when comparing its historical volatility, Samsung Electronics Co is 1.51 times less risky than DONGKUK STEEL. The stock trades about 0.0 of its potential returns per unit of risk. The DONGKUK STEEL MILL is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  836,000  in DONGKUK STEEL MILL on December 2, 2024 and sell it today you would earn a total of  94,000  from holding DONGKUK STEEL MILL or generate 11.24% 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.  DONGKUK STEEL MILL

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.

DONGKUK STEEL MILL

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in DONGKUK STEEL MILL are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, DONGKUK STEEL sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Samsung Electronics and DONGKUK STEEL

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

The idea behind Samsung Electronics Co and DONGKUK STEEL MILL 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.