Correlation Between Display Tech and Samick Musical

Can any of the company-specific risk be diversified away by investing in both Display Tech and Samick Musical 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 Display Tech and Samick Musical into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Display Tech Co and Samick Musical Instruments, you can compare the effects of market volatilities on Display Tech and Samick Musical 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 Display Tech with a short position of Samick Musical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Display Tech and Samick Musical.

Diversification Opportunities for Display Tech and Samick Musical

0.46

Correlation Coefficient

Display Tech  Samick Musical

Very weak diversification

The 3 months correlation between Display and Samick is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Display Tech Co and Samick Musical Instruments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Samick Musical Instr and Display Tech 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 Display Tech Co are associated (or correlated) with Samick Musical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Samick Musical Instr has no effect on the direction of Display Tech i.e., Display Tech and Samick Musical go up and down completely randomly.

Pair Corralation between Display Tech and Samick Musical

Assuming the 90 days trading horizon Display Tech Co is expected to under-perform the Samick Musical. But the stock apears to be less risky and, when comparing its historical volatility, Display Tech Co is 2.59 times less risky than Samick Musical. The stock trades about -0.03 of its potential returns per unit of risk. The Samick Musical Instruments is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  116,500  in Samick Musical Instruments on December 30, 2024 and sell it today you would lose (4,000) from holding Samick Musical Instruments or give up 3.43% of portfolio value over 90 days.

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

Display Tech Co  vs.  Samick Musical Instruments

Display Tech

Risk-Adjusted Performance

Very Weak

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

Samick Musical Instr

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Display Tech and Samick Musical

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

The idea behind Display Tech Co and Samick Musical Instruments 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.