Correlation Between Korea Information and Samsung Fire

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

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

Diversification Opportunities for Korea Information and Samsung Fire

-0.32

Correlation Coefficient

Korea Information  Samsung Fire

Very good diversification

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

Pair Corralation between Korea Information and Samsung Fire

Assuming the 90 days trading horizon Korea Information Communications is expected to under-perform the Samsung Fire. But the stock apears to be less risky and, when comparing its historical volatility, Korea Information Communications is 2.04 times less risky than Samsung Fire. The stock trades about -0.02 of its potential returns per unit of risk. The Samsung Fire Marine is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  35,100,000  in Samsung Fire Marine on October 12, 2024 and sell it today you would earn a total of  1,000,000  from holding Samsung Fire Marine or generate 2.85% return on investment over 90 days.

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

Korea Information Communicatio  vs.  Samsung Fire Marine

Korea Information

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Korea Information Communications has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Korea Information is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Samsung Fire Marine

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Samsung Fire Marine are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Samsung Fire is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Korea Information and Samsung Fire

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

The idea behind Korea Information Communications and Samsung Fire Marine 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.