Correlation Between Samsung SDI and Wonbang Tech

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

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

Diversification Opportunities for Samsung SDI and Wonbang Tech

-0.28

Correlation Coefficient

Samsung SDI  Wonbang Tech

Very good diversification

The 3 months correlation between Samsung and Wonbang is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Samsung SDI and Wonbang Tech Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wonbang Tech 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 Wonbang Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wonbang Tech has no effect on the direction of Samsung SDI i.e., Samsung SDI and Wonbang Tech go up and down completely randomly.

Pair Corralation between Samsung SDI and Wonbang Tech

Assuming the 90 days trading horizon Samsung SDI is expected to under-perform the Wonbang Tech. But the stock apears to be less risky and, when comparing its historical volatility, Samsung SDI is 1.02 times less risky than Wonbang Tech. The stock trades about -0.03 of its potential returns per unit of risk. The Wonbang Tech Co is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  1,255,357  in Wonbang Tech Co on November 29, 2024 and sell it today you would earn a total of  146,643  from holding Wonbang Tech Co or generate 11.68% return on investment over 90 days.

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

Samsung SDI  vs.  Wonbang Tech Co

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 somewhat strong basic indicators, Samsung SDI is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Wonbang Tech

Risk-Adjusted Performance

Modest

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

Pair Trading with Samsung SDI and Wonbang Tech

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

The idea behind Samsung SDI and Wonbang Tech 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.