Correlation Between Samsung SDI and Samsung Biologics

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

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

Diversification Opportunities for Samsung SDI and Samsung Biologics

0.49

Correlation Coefficient

Samsung SDI  Samsung Biologics

Very weak diversification

The 3 months correlation between Samsung and Samsung is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Samsung SDI and Samsung Biologics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Samsung Biologics 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 Samsung Biologics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Samsung Biologics has no effect on the direction of Samsung SDI i.e., Samsung SDI and Samsung Biologics go up and down completely randomly.

Pair Corralation between Samsung SDI and Samsung Biologics

Assuming the 90 days trading horizon Samsung SDI is expected to under-perform the Samsung Biologics. In addition to that, Samsung SDI is 2.52 times more volatile than Samsung Biologics Co. It trades about -0.13 of its total potential returns per unit of risk. Samsung Biologics Co is currently generating about -0.03 per unit of volatility. If you would invest  98,000,000  in Samsung Biologics Co on August 30, 2024 and sell it today you would lose (2,700,000) from holding Samsung Biologics Co or give up 2.76% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.31%
Values	Daily Returns

Samsung SDI  vs.  Samsung Biologics Co

Samsung SDI

Risk-Adjusted Performance

0 of 100

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 December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Samsung Biologics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Samsung Biologics Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Samsung Biologics 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 Samsung Biologics

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

The idea behind Samsung SDI and Samsung Biologics 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.