Correlation Between Samsung SDI and TCC Steel

Can any of the company-specific risk be diversified away by investing in both Samsung SDI and TCC 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 SDI and TCC Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Samsung SDI and TCC Steel Corp, you can compare the effects of market volatilities on Samsung SDI and TCC 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 SDI with a short position of TCC Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Samsung SDI and TCC Steel.

Diversification Opportunities for Samsung SDI and TCC Steel

0.67

Correlation Coefficient

Samsung SDI  TCC Steel

Poor diversification

The 3 months correlation between Samsung and TCC is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Samsung SDI and TCC Steel Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TCC Steel Corp and Samsung SDI 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 SDI are associated (or correlated) with TCC Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TCC Steel Corp has no effect on the direction of Samsung SDI i.e., Samsung SDI and TCC Steel go up and down completely randomly.

Pair Corralation between Samsung SDI and TCC Steel

Assuming the 90 days trading horizon Samsung SDI is expected to under-perform the TCC Steel. But the stock apears to be less risky and, when comparing its historical volatility, Samsung SDI is 1.41 times less risky than TCC Steel. The stock trades about -0.13 of its potential returns per unit of risk. The TCC Steel Corp is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  2,851,725  in TCC Steel Corp on December 24, 2024 and sell it today you would lose (141,725) from holding TCC Steel Corp or give up 4.97% of portfolio value over 90 days.

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

Samsung SDI  vs.  TCC Steel Corp

Samsung SDI

Risk-Adjusted Performance

Very Weak

Over the last 90 days Samsung SDI has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

TCC Steel Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days TCC Steel Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, TCC Steel 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 SDI and TCC Steel

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

The idea behind Samsung SDI and TCC Steel Corp 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.