Correlation Between Cairn Homes and Samsung Electronics

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

By analyzing existing cross correlation between Cairn Homes PLC and Samsung Electronics Co, you can compare the effects of market volatilities on Cairn Homes and Samsung Electronics 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 Cairn Homes with a short position of Samsung Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cairn Homes and Samsung Electronics.

Diversification Opportunities for Cairn Homes and Samsung Electronics

-0.28

Correlation Coefficient

Cairn Homes  Samsung Electronics

Very good diversification

The 3 months correlation between Cairn and Samsung is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Cairn Homes PLC and Samsung Electronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Samsung Electronics and Cairn Homes 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 Cairn Homes PLC are associated (or correlated) with Samsung Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Samsung Electronics has no effect on the direction of Cairn Homes i.e., Cairn Homes and Samsung Electronics go up and down completely randomly.

Pair Corralation between Cairn Homes and Samsung Electronics

Assuming the 90 days trading horizon Cairn Homes PLC is expected to under-perform the Samsung Electronics. But the stock apears to be less risky and, when comparing its historical volatility, Cairn Homes PLC is 1.15 times less risky than Samsung Electronics. The stock trades about -0.03 of its potential returns per unit of risk. The Samsung Electronics Co is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  90,150  in Samsung Electronics Co on November 28, 2024 and sell it today you would earn a total of  9,300  from holding Samsung Electronics Co or generate 10.32% return on investment over 90 days.

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

Cairn Homes PLC  vs.  Samsung Electronics Co

Cairn Homes PLC

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Cairn Homes PLC are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Cairn Homes is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Samsung Electronics

Risk-Adjusted Performance

Very Weak

Over the last 90 days Samsung Electronics Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Samsung Electronics is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Cairn Homes and Samsung Electronics

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

The idea behind Cairn Homes PLC and Samsung Electronics Co 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.