Correlation Between Lake Materials and Samick Musical

Can any of the company-specific risk be diversified away by investing in both Lake Materials and Samick Musical 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 Lake Materials and Samick Musical into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Lake Materials Co and Samick Musical Instruments, you can compare the effects of market volatilities on Lake Materials and Samick Musical 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 Lake Materials with a short position of Samick Musical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lake Materials and Samick Musical.

Diversification Opportunities for Lake Materials and Samick Musical

-0.58

Correlation Coefficient

Lake Materials  Samick Musical

Excellent diversification

The 3 months correlation between Lake and Samick is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Lake Materials Co and Samick Musical Instruments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Samick Musical Instr and Lake Materials 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 Lake Materials Co are associated (or correlated) with Samick Musical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Samick Musical Instr has no effect on the direction of Lake Materials i.e., Lake Materials and Samick Musical go up and down completely randomly.

Pair Corralation between Lake Materials and Samick Musical

Assuming the 90 days trading horizon Lake Materials Co is expected to under-perform the Samick Musical. In addition to that, Lake Materials is 2.7 times more volatile than Samick Musical Instruments. It trades about -0.17 of its total potential returns per unit of risk. Samick Musical Instruments is currently generating about 0.19 per unit of volatility. If you would invest  106,900  in Samick Musical Instruments on September 15, 2024 and sell it today you would earn a total of  14,700  from holding Samick Musical Instruments or generate 13.75% return on investment over 90 days.

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

Lake Materials Co  vs.  Samick Musical Instruments

Lake Materials

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lake Materials 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 January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Samick Musical Instr

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Samick Musical Instruments are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Samick Musical sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lake Materials and Samick Musical

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

The idea behind Lake Materials Co and Samick Musical Instruments 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.