Correlation Between HMM and Samsung Biologics

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

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

Diversification Opportunities for HMM and Samsung Biologics

-0.47

Correlation Coefficient

HMM  Samsung Biologics

Very good diversification

The 3 months correlation between HMM and Samsung is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding HMM Co and Samsung Biologics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Samsung Biologics and HMM 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 HMM Co 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 HMM i.e., HMM and Samsung Biologics go up and down completely randomly.

Pair Corralation between HMM and Samsung Biologics

Assuming the 90 days trading horizon HMM is expected to generate 3.94 times less return on investment than Samsung Biologics. But when comparing it to its historical volatility, HMM Co is 1.06 times less risky than Samsung Biologics. It trades about 0.04 of its potential returns per unit of risk. Samsung Biologics Co is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  91,600,000  in Samsung Biologics Co on September 19, 2024 and sell it today you would earn a total of  5,800,000  from holding Samsung Biologics Co or generate 6.33% return on investment over 90 days.

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

HMM Co  vs.  Samsung Biologics Co

HMM Co

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in HMM Co are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, HMM may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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 HMM and Samsung Biologics

The main advantage of trading using opposite HMM and Samsung Biologics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HMM 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 HMM Co 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.

Check out your portfolio center.

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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.