Correlation Between Dongbang Ship and Samsung Life

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

By analyzing existing cross correlation between Dongbang Ship Machinery and Samsung Life Insurance, you can compare the effects of market volatilities on Dongbang Ship 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 Dongbang Ship with a short position of Samsung Life. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dongbang Ship and Samsung Life.

Diversification Opportunities for Dongbang Ship and Samsung Life

0.64

Correlation Coefficient

Dongbang Ship  Samsung Life

Poor diversification

The 3 months correlation between Dongbang and Samsung is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Dongbang Ship Machinery and Samsung Life Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Samsung Life Insurance and Dongbang Ship 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 Dongbang Ship Machinery 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 Insurance has no effect on the direction of Dongbang Ship i.e., Dongbang Ship and Samsung Life go up and down completely randomly.

Pair Corralation between Dongbang Ship and Samsung Life

Assuming the 90 days trading horizon Dongbang Ship is expected to generate 1.27 times less return on investment than Samsung Life. In addition to that, Dongbang Ship is 1.07 times more volatile than Samsung Life Insurance. It trades about 0.06 of its total potential returns per unit of risk. Samsung Life Insurance is currently generating about 0.08 per unit of volatility. If you would invest  9,840,000  in Samsung Life Insurance on September 4, 2024 and sell it today you would earn a total of  1,060,000  from holding Samsung Life Insurance or generate 10.77% return on investment over 90 days.

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

Dongbang Ship Machinery  vs.  Samsung Life Insurance

Dongbang Ship Machinery

Risk-Adjusted Performance

4 of 100

Insignificant

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

Samsung Life Insurance

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Samsung Life Insurance are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Samsung Life sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dongbang Ship and Samsung Life

The main advantage of trading using opposite Dongbang Ship and Samsung Life positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dongbang Ship 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 Dongbang Ship Machinery and Samsung Life Insurance 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.