Correlation Between Samsung SDI and IQuest

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

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

Diversification Opportunities for Samsung SDI and IQuest

-0.32

Correlation Coefficient

Samsung SDI  IQuest

Very good diversification

The 3 months correlation between Samsung and IQuest is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Samsung SDI and IQuest Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IQuest 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 IQuest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IQuest has no effect on the direction of Samsung SDI i.e., Samsung SDI and IQuest go up and down completely randomly.

Pair Corralation between Samsung SDI and IQuest

Assuming the 90 days trading horizon Samsung SDI is expected to under-perform the IQuest. But the stock apears to be less risky and, when comparing its historical volatility, Samsung SDI is 1.01 times less risky than IQuest. The stock trades about -0.06 of its potential returns per unit of risk. The IQuest Co is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  261,242  in IQuest Co on September 2, 2024 and sell it today you would lose (23,742) from holding IQuest Co or give up 9.09% of portfolio value over 90 days.

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

Samsung SDI  vs.  IQuest 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 January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

IQuest

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in IQuest Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, IQuest 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 IQuest

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

The idea behind Samsung SDI and IQuest 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.