Correlation Between Tae Kyung and Samsung Life

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

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

Diversification Opportunities for Tae Kyung and Samsung Life

-0.34

Correlation Coefficient

Tae Kyung  Samsung Life

Very good diversification

The 3 months correlation between Tae and Samsung is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Tae Kyung Chemical and Samsung Life in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Samsung Life and Tae Kyung 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 Tae Kyung Chemical are associated (or correlated) with Samsung Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Samsung Life has no effect on the direction of Tae Kyung i.e., Tae Kyung and Samsung Life go up and down completely randomly.

Pair Corralation between Tae Kyung and Samsung Life

Assuming the 90 days trading horizon Tae Kyung Chemical is expected to generate 0.47 times more return on investment than Samsung Life. However, Tae Kyung Chemical is 2.12 times less risky than Samsung Life. It trades about 0.08 of its potential returns per unit of risk. Samsung Life is currently generating about -0.07 per unit of risk. If you would invest  1,116,929  in Tae Kyung Chemical on December 23, 2024 and sell it today you would earn a total of  58,071  from holding Tae Kyung Chemical or generate 5.2% return on investment over 90 days.

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

Tae Kyung Chemical  vs.  Samsung Life

Tae Kyung Chemical

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Tae Kyung Chemical are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Tae Kyung is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Samsung Life

Risk-Adjusted Performance

Very Weak

Over the last 90 days Samsung Life 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.

Pair Trading with Tae Kyung and Samsung Life

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

The idea behind Tae Kyung Chemical and Samsung Life 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.