Correlation Between Samsung Biologics and Organic Tea

Can any of the company-specific risk be diversified away by investing in both Samsung Biologics and Organic Tea 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 Organic Tea 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 Organic Tea Cosmetics, you can compare the effects of market volatilities on Samsung Biologics and Organic Tea 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 Organic Tea. Check out your portfolio center. Please also check ongoing floating volatility patterns of Samsung Biologics and Organic Tea.

Diversification Opportunities for Samsung Biologics and Organic Tea

-0.36

Correlation Coefficient

Samsung Biologics  Organic Tea

Very good diversification

The 3 months correlation between Samsung and Organic is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Samsung Biologics Co and Organic Tea Cosmetics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Organic Tea Cosmetics 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 Organic Tea. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Organic Tea Cosmetics has no effect on the direction of Samsung Biologics i.e., Samsung Biologics and Organic Tea go up and down completely randomly.

Pair Corralation between Samsung Biologics and Organic Tea

Assuming the 90 days trading horizon Samsung Biologics Co is expected to generate 0.54 times more return on investment than Organic Tea. However, Samsung Biologics Co is 1.86 times less risky than Organic Tea. It trades about 0.01 of its potential returns per unit of risk. Organic Tea Cosmetics is currently generating about -0.08 per unit of risk. If you would invest  99,900,000  in Samsung Biologics Co on October 17, 2024 and sell it today you would earn a total of  100,000  from holding Samsung Biologics Co or generate 0.1% return on investment over 90 days.

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

Samsung Biologics Co  vs.  Organic Tea Cosmetics

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.

Organic Tea Cosmetics

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Organic Tea Cosmetics are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Organic Tea sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Samsung Biologics and Organic Tea

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

The idea behind Samsung Biologics Co and Organic Tea Cosmetics 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.