Correlation Between Cheryong Industrial and Samsung Biologics

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

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

Diversification Opportunities for Cheryong Industrial and Samsung Biologics

0.65

Correlation Coefficient

Cheryong Industrial  Samsung Biologics

Poor diversification

The 3 months correlation between Cheryong and Samsung is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Cheryong Industrial 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 Cheryong Industrial 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 Cheryong Industrial 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 Cheryong Industrial i.e., Cheryong Industrial and Samsung Biologics go up and down completely randomly.

Pair Corralation between Cheryong Industrial and Samsung Biologics

Assuming the 90 days trading horizon Cheryong Industrial CoLtd is expected to generate 2.2 times more return on investment than Samsung Biologics. However, Cheryong Industrial is 2.2 times more volatile than Samsung Biologics Co. It trades about 0.03 of its potential returns per unit of risk. Samsung Biologics Co is currently generating about 0.03 per unit of risk. If you would invest  571,000  in Cheryong Industrial CoLtd on September 27, 2024 and sell it today you would earn a total of  6,000  from holding Cheryong Industrial CoLtd or generate 1.05% return on investment over 90 days.

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

Cheryong Industrial CoLtd  vs.  Samsung Biologics Co

Cheryong Industrial CoLtd

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cheryong Industrial CoLtd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Samsung Biologics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Samsung Biologics Co has generated negative risk-adjusted returns adding no value to investors with long positions. 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 Cheryong Industrial and Samsung Biologics

The main advantage of trading using opposite Cheryong Industrial and Samsung Biologics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cheryong Industrial 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 Cheryong Industrial 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.

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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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.