Correlation Between Korea Investment and Samsung Life

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Can any of the company-specific risk be diversified away by investing in both Korea Investment and Samsung Life 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 Investment and Samsung Life into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Korea Investment Holdings and Samsung Life, you can compare the effects of market volatilities on Korea Investment and Samsung Life 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 Investment with a short position of Samsung Life. Check out your portfolio center. Please also check ongoing floating volatility patterns of Korea Investment and Samsung Life.

Diversification Opportunities for Korea Investment and Samsung Life

0.63
  Correlation Coefficient

Poor diversification

The 3 months correlation between Korea and Samsung is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Korea Investment Holdings and Samsung Life in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Samsung Life and Korea Investment 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 Investment Holdings are associated (or correlated) with Samsung Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Samsung Life has no effect on the direction of Korea Investment i.e., Korea Investment and Samsung Life go up and down completely randomly.

Pair Corralation between Korea Investment and Samsung Life

Assuming the 90 days trading horizon Korea Investment is expected to generate 1.67 times less return on investment than Samsung Life. But when comparing it to its historical volatility, Korea Investment Holdings is 1.55 times less risky than Samsung Life. It trades about 0.03 of its potential returns per unit of risk. Samsung Life is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  7,180,000  in Samsung Life on October 4, 2024 and sell it today you would earn a total of  2,300,000  from holding Samsung Life or generate 32.03% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Korea Investment Holdings  vs.  Samsung Life

 Performance 
       Timeline  
Korea Investment Holdings 

Risk-Adjusted Performance

4 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Korea Investment Holdings are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Korea Investment is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
Samsung Life 

Risk-Adjusted Performance

1 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Samsung Life are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Samsung Life is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Korea Investment and Samsung Life Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Korea Investment and Samsung Life

The main advantage of trading using opposite Korea Investment and Samsung Life positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Korea Investment position performs unexpectedly, Samsung Life 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 Life will offset losses from the drop in Samsung Life's long position.
The idea behind Korea Investment Holdings and Samsung Life 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.

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