Correlation Between Company K and Samsung Special

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

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

Diversification Opportunities for Company K and Samsung Special

0.0

Correlation Coefficient

Company K  Samsung Special

Pay attention - limited upside

The 3 months correlation between Company and Samsung is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Company K Partners and Samsung Special Purpose in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Samsung Special Purpose and Company K 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 Company K Partners are associated (or correlated) with Samsung Special. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Samsung Special Purpose has no effect on the direction of Company K i.e., Company K and Samsung Special go up and down completely randomly.

Pair Corralation between Company K and Samsung Special

Assuming the 90 days trading horizon Company K Partners is expected to under-perform the Samsung Special. In addition to that, Company K is 12.63 times more volatile than Samsung Special Purpose. It trades about -0.01 of its total potential returns per unit of risk. Samsung Special Purpose is currently generating about -0.06 per unit of volatility. If you would invest  213,000  in Samsung Special Purpose on September 22, 2024 and sell it today you would lose (3,000) from holding Samsung Special Purpose or give up 1.41% of portfolio value over 90 days.

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

Company K Partners  vs.  Samsung Special Purpose

Company K Partners

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Company K Partners has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Company K is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Samsung Special Purpose

Risk-Adjusted Performance

0 of 100

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 somewhat strong basic indicators, Samsung Special is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Company K and Samsung Special

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

The idea behind Company K Partners and Samsung Special Purpose 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..