Correlation Between Samsung Special and Namyang Dairy

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

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

Diversification Opportunities for Samsung Special and Namyang Dairy

-0.49

Correlation Coefficient

Samsung Special  Namyang Dairy

Very good diversification

The 3 months correlation between Samsung and Namyang is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Samsung Special Purpose and Namyang Dairy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Namyang Dairy and Samsung Special 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 Special Purpose are associated (or correlated) with Namyang Dairy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Namyang Dairy has no effect on the direction of Samsung Special i.e., Samsung Special and Namyang Dairy go up and down completely randomly.

Pair Corralation between Samsung Special and Namyang Dairy

Assuming the 90 days trading horizon Samsung Special Purpose is expected to under-perform the Namyang Dairy. In addition to that, Samsung Special is 1.08 times more volatile than Namyang Dairy. It trades about -0.09 of its total potential returns per unit of risk. Namyang Dairy is currently generating about 0.16 per unit of volatility. If you would invest  5,840,000  in Namyang Dairy on December 26, 2024 and sell it today you would earn a total of  1,210,000  from holding Namyang Dairy or generate 20.72% return on investment over 90 days.

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

Samsung Special Purpose  vs.  Namyang Dairy

Samsung Special Purpose

Risk-Adjusted Performance

Very Weak

Over the last 90 days Samsung Special Purpose 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 April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Namyang Dairy

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Namyang Dairy are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Namyang Dairy sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Samsung Special and Namyang Dairy

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

The idea behind Samsung Special Purpose and Namyang Dairy 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 Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.