Correlation Between Samsung Biologics and Posco Chemical

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

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

Diversification Opportunities for Samsung Biologics and Posco Chemical

0.66

Correlation Coefficient

Samsung Biologics  Posco Chemical

Poor diversification

The 3 months correlation between Samsung and Posco is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Samsung Biologics Co and Posco Chemical Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Posco Chemical and Samsung Biologics 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 Samsung Biologics Co are associated (or correlated) with Posco Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Posco Chemical has no effect on the direction of Samsung Biologics i.e., Samsung Biologics and Posco Chemical go up and down completely randomly.

Pair Corralation between Samsung Biologics and Posco Chemical

Assuming the 90 days trading horizon Samsung Biologics is expected to generate 1.06 times less return on investment than Posco Chemical. But when comparing it to its historical volatility, Samsung Biologics Co is 2.66 times less risky than Posco Chemical. It trades about 0.04 of its potential returns per unit of risk. Posco Chemical Co is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  19,034,700  in Posco Chemical Co on August 31, 2024 and sell it today you would lose (1,804,700) from holding Posco Chemical Co or give up 9.48% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.78%
Values	Daily Returns

Samsung Biologics Co  vs.  Posco Chemical Co

Samsung Biologics

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Samsung Biologics Co are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. 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.

Posco Chemical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Posco Chemical Co 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 December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Samsung Biologics and Posco Chemical

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

The idea behind Samsung Biologics Co and Posco Chemical 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.