Correlation Between Next Bt and Samsung Electronics

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

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

Diversification Opportunities for Next Bt and Samsung Electronics

0.29

Correlation Coefficient

Next Bt  Samsung Electronics

Modest diversification

The 3 months correlation between Next and Samsung is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Next Bt Co and Samsung Electronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Samsung Electronics and Next Bt 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 Next Bt Co are associated (or correlated) with Samsung Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Samsung Electronics has no effect on the direction of Next Bt i.e., Next Bt and Samsung Electronics go up and down completely randomly.

Pair Corralation between Next Bt and Samsung Electronics

Assuming the 90 days trading horizon Next Bt Co is expected to generate 7.13 times more return on investment than Samsung Electronics. However, Next Bt is 7.13 times more volatile than Samsung Electronics Co. It trades about 0.15 of its potential returns per unit of risk. Samsung Electronics Co is currently generating about 0.14 per unit of risk. If you would invest  78,667  in Next Bt Co on December 24, 2024 and sell it today you would earn a total of  63,833  from holding Next Bt Co or generate 81.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	85.96%
Values	Daily Returns

Next Bt Co  vs.  Samsung Electronics Co

Next Bt

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Next Bt Co are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Next Bt sustained solid returns over the last few months and may actually be approaching a breakup point.

Samsung Electronics

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Samsung Electronics Co are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Samsung Electronics sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Next Bt and Samsung Electronics

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

The idea behind Next Bt Co and Samsung Electronics 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.