Correlation Between Cloud Air and Samsung Biologics

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

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

Diversification Opportunities for Cloud Air and Samsung Biologics

0.04

Correlation Coefficient

Cloud Air  Samsung Biologics

Significant diversification

The 3 months correlation between Cloud and Samsung is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Cloud Air CoLtd and Samsung Biologics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Samsung Biologics and Cloud Air 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 Cloud Air CoLtd 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 Cloud Air i.e., Cloud Air and Samsung Biologics go up and down completely randomly.

Pair Corralation between Cloud Air and Samsung Biologics

Assuming the 90 days trading horizon Cloud Air CoLtd is expected to generate 1.86 times more return on investment than Samsung Biologics. However, Cloud Air is 1.86 times more volatile than Samsung Biologics Co. It trades about 0.22 of its potential returns per unit of risk. Samsung Biologics Co is currently generating about 0.09 per unit of risk. If you would invest  75,800  in Cloud Air CoLtd on December 7, 2024 and sell it today you would earn a total of  19,100  from holding Cloud Air CoLtd or generate 25.2% return on investment over 90 days.

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

Cloud Air CoLtd  vs.  Samsung Biologics Co

Cloud Air CoLtd

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Cloud Air CoLtd are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Cloud Air sustained solid returns over the last few months and may actually be approaching a breakup point.

Samsung Biologics

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Samsung Biologics Co are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. 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 Cloud Air and Samsung Biologics

The main advantage of trading using opposite Cloud Air and Samsung Biologics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cloud Air 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 Cloud Air CoLtd 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.