Correlation Between KB No2 and Samsung SDI

Can any of the company-specific risk be diversified away by investing in both KB No2 and Samsung SDI 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 KB No2 and Samsung SDI into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between KB No2 Special and Samsung SDI, you can compare the effects of market volatilities on KB No2 and Samsung SDI 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 KB No2 with a short position of Samsung SDI. Check out your portfolio center. Please also check ongoing floating volatility patterns of KB No2 and Samsung SDI.

Diversification Opportunities for KB No2 and Samsung SDI

0.93

Correlation Coefficient

KB No2  Samsung SDI

Almost no diversification

The 3 months correlation between 192250 and Samsung is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding KB No2 Special and Samsung SDI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Samsung SDI and KB No2 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 KB No2 Special are associated (or correlated) with Samsung SDI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Samsung SDI has no effect on the direction of KB No2 i.e., KB No2 and Samsung SDI go up and down completely randomly.

Pair Corralation between KB No2 and Samsung SDI

Assuming the 90 days trading horizon KB No2 Special is expected to generate 1.06 times more return on investment than Samsung SDI. However, KB No2 is 1.06 times more volatile than Samsung SDI. It trades about -0.05 of its potential returns per unit of risk. Samsung SDI is currently generating about -0.06 per unit of risk. If you would invest  1,268,000  in KB No2 Special on September 20, 2024 and sell it today you would lose (466,000) from holding KB No2 Special or give up 36.75% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	94.17%
Values	Daily Returns

KB No2 Special  vs.  Samsung SDI

KB No2 Special

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KB No2 Special 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 SDI

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Samsung SDI 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.

Pair Trading with KB No2 and Samsung SDI

The main advantage of trading using opposite KB No2 and Samsung SDI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KB No2 position performs unexpectedly, Samsung SDI 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 SDI will offset losses from the drop in Samsung SDI's long position.

The idea behind KB No2 Special and Samsung SDI 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.