Correlation Between J Steel and Samsung Biologics

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

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

Diversification Opportunities for J Steel and Samsung Biologics

-0.38

Correlation Coefficient

J Steel  Samsung Biologics

Very good diversification

The 3 months correlation between 023440 and Samsung is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding J Steel 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 J Steel 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 J Steel 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 J Steel i.e., J Steel and Samsung Biologics go up and down completely randomly.

Pair Corralation between J Steel and Samsung Biologics

Assuming the 90 days trading horizon J Steel Co is expected to generate 3.4 times more return on investment than Samsung Biologics. However, J Steel is 3.4 times more volatile than Samsung Biologics Co. It trades about 0.11 of its potential returns per unit of risk. Samsung Biologics Co is currently generating about -0.06 per unit of risk. If you would invest  135,200  in J Steel Co on September 23, 2024 and sell it today you would earn a total of  39,200  from holding J Steel Co or generate 28.99% return on investment over 90 days.

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

J Steel Co  vs.  Samsung Biologics Co

J Steel

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in J Steel Co are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, J Steel sustained solid returns over the last few months and may actually be approaching a breakup point.

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 J Steel and Samsung Biologics

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

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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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.