Correlation Between Solution Advanced and Samsung KODEX

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

By analyzing existing cross correlation between Solution Advanced Technology and Samsung KODEX IT, you can compare the effects of market volatilities on Solution Advanced and Samsung KODEX 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 Solution Advanced with a short position of Samsung KODEX. Check out your portfolio center. Please also check ongoing floating volatility patterns of Solution Advanced and Samsung KODEX.

Diversification Opportunities for Solution Advanced and Samsung KODEX

0.2

Correlation Coefficient

Solution Advanced  Samsung KODEX

Modest diversification

The 3 months correlation between Solution and Samsung is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Solution Advanced Technology and Samsung KODEX IT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Samsung KODEX IT and Solution Advanced 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 Solution Advanced Technology are associated (or correlated) with Samsung KODEX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Samsung KODEX IT has no effect on the direction of Solution Advanced i.e., Solution Advanced and Samsung KODEX go up and down completely randomly.

Pair Corralation between Solution Advanced and Samsung KODEX

Assuming the 90 days trading horizon Solution Advanced Technology is expected to generate 3.96 times more return on investment than Samsung KODEX. However, Solution Advanced is 3.96 times more volatile than Samsung KODEX IT. It trades about 0.18 of its potential returns per unit of risk. Samsung KODEX IT is currently generating about 0.09 per unit of risk. If you would invest  131,200  in Solution Advanced Technology on December 28, 2024 and sell it today you would earn a total of  108,300  from holding Solution Advanced Technology or generate 82.55% return on investment over 90 days.

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

Solution Advanced Technology  vs.  Samsung KODEX IT

Solution Advanced

Risk-Adjusted Performance

Good

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

Samsung KODEX IT

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Samsung KODEX IT are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Samsung KODEX may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Solution Advanced and Samsung KODEX

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

The idea behind Solution Advanced Technology and Samsung KODEX IT 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.