Correlation Between SCI Information and Samsung Fire

Can any of the company-specific risk be diversified away by investing in both SCI 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 SCI 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 SCI Information Service and Samsung Fire Marine, you can compare the effects of market volatilities on SCI 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 SCI Information with a short position of Samsung Fire. Check out your portfolio center. Please also check ongoing floating volatility patterns of SCI Information and Samsung Fire.

Diversification Opportunities for SCI Information and Samsung Fire

-0.6

Correlation Coefficient

SCI Information  Samsung Fire

Excellent diversification

The 3 months correlation between SCI and Samsung is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding SCI Information Service 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 SCI 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 SCI Information Service 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 SCI Information i.e., SCI Information and Samsung Fire go up and down completely randomly.

Pair Corralation between SCI Information and Samsung Fire

Assuming the 90 days trading horizon SCI Information Service is expected to generate 1.38 times more return on investment than Samsung Fire. However, SCI Information is 1.38 times more volatile than Samsung Fire Marine. It trades about 0.3 of its potential returns per unit of risk. Samsung Fire Marine is currently generating about -0.04 per unit of risk. If you would invest  212,000  in SCI Information Service on October 11, 2024 and sell it today you would earn a total of  25,500  from holding SCI Information Service or generate 12.03% return on investment over 90 days.

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

SCI Information Service  vs.  Samsung Fire Marine

SCI Information Service

Risk-Adjusted Performance

1 of 100

Weak

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

4 of 100

Insignificant

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

Pair Trading with SCI Information and Samsung Fire

The main advantage of trading using opposite SCI Information and Samsung Fire positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SCI 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 SCI Information Service 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .