Correlation Between Samsung SDI and Wave Electronics

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

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

Diversification Opportunities for Samsung SDI and Wave Electronics

-0.27

Correlation Coefficient

Samsung SDI  Wave Electronics

Very good diversification

The 3 months correlation between Samsung and Wave is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Samsung SDI and Wave Electronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wave Electronics 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 Wave Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wave Electronics has no effect on the direction of Samsung SDI i.e., Samsung SDI and Wave Electronics go up and down completely randomly.

Pair Corralation between Samsung SDI and Wave Electronics

Assuming the 90 days trading horizon Samsung SDI is expected to under-perform the Wave Electronics. In addition to that, Samsung SDI is 1.01 times more volatile than Wave Electronics Co. It trades about -0.07 of its total potential returns per unit of risk. Wave Electronics Co is currently generating about 0.0 per unit of volatility. If you would invest  485,000  in Wave Electronics Co on December 2, 2024 and sell it today you would lose (97,000) from holding Wave Electronics Co or give up 20.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.79%
Values	Daily Returns

Samsung SDI  vs.  Wave Electronics 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 latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Wave Electronics

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Wave Electronics Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Wave Electronics 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 Wave Electronics

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

The idea behind Samsung SDI and Wave Electronics 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.