Correlation Between Kosdaq Composite and Samsung Asset

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

By analyzing existing cross correlation between Kosdaq Composite Index and Samsung Asset Management, you can compare the effects of market volatilities on Kosdaq Composite and Samsung Asset 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 Kosdaq Composite with a short position of Samsung Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kosdaq Composite and Samsung Asset.

Diversification Opportunities for Kosdaq Composite and Samsung Asset

0.15

Correlation Coefficient

Kosdaq Composite  Samsung Asset

Average diversification

The 3 months correlation between Kosdaq and Samsung is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Kosdaq Composite Index and Samsung Asset Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Samsung Asset Management and Kosdaq Composite 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 Kosdaq Composite Index are associated (or correlated) with Samsung Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Samsung Asset Management has no effect on the direction of Kosdaq Composite i.e., Kosdaq Composite and Samsung Asset go up and down completely randomly.

Pair Corralation between Kosdaq Composite and Samsung Asset

Assuming the 90 days trading horizon Kosdaq Composite Index is expected to generate 1.05 times more return on investment than Samsung Asset. However, Kosdaq Composite is 1.05 times more volatile than Samsung Asset Management. It trades about 0.08 of its potential returns per unit of risk. Samsung Asset Management is currently generating about -0.12 per unit of risk. If you would invest  67,564  in Kosdaq Composite Index on December 26, 2024 and sell it today you would earn a total of  3,562  from holding Kosdaq Composite Index or generate 5.27% return on investment over 90 days.

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

Kosdaq Composite Index  vs.  Samsung Asset Management

Pair Trading with Kosdaq Composite and Samsung Asset

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

The idea behind Kosdaq Composite Index and Samsung Asset Management 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 Anywhere module to track or share privately all of your investments from the convenience of any device.