Correlation Between TAL Education and Samsung Electronics

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

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

Diversification Opportunities for TAL Education and Samsung Electronics

0.37

Correlation Coefficient

TAL Education  Samsung Electronics

Weak diversification

The 3 months correlation between TAL and Samsung is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding TAL Education Group and Samsung Electronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Samsung Electronics and TAL Education 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 TAL Education Group 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 TAL Education i.e., TAL Education and Samsung Electronics go up and down completely randomly.

Pair Corralation between TAL Education and Samsung Electronics

Assuming the 90 days trading horizon TAL Education is expected to generate 1.61 times less return on investment than Samsung Electronics. But when comparing it to its historical volatility, TAL Education Group is 1.02 times less risky than Samsung Electronics. It trades about 0.09 of its potential returns per unit of risk. Samsung Electronics Co is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  88,000  in Samsung Electronics Co on October 22, 2024 and sell it today you would earn a total of  4,000  from holding Samsung Electronics Co or generate 4.55% return on investment over 90 days.

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

TAL Education Group  vs.  Samsung Electronics Co

TAL Education Group

Risk-Adjusted Performance

0 of 100

Very Weak

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

Samsung Electronics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Samsung Electronics Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Samsung Electronics is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with TAL Education and Samsung Electronics

The main advantage of trading using opposite TAL Education and Samsung Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TAL Education 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 TAL Education Group 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.