Correlation Between Nippon Light and Samsung Electronics

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

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

Diversification Opportunities for Nippon Light and Samsung Electronics

0.54

Correlation Coefficient

Nippon Light  Samsung Electronics

Very weak diversification

The 3 months correlation between Nippon and Samsung is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Nippon Light Metal and Samsung Electronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Samsung Electronics and Nippon Light 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 Nippon Light Metal 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 Nippon Light i.e., Nippon Light and Samsung Electronics go up and down completely randomly.

Pair Corralation between Nippon Light and Samsung Electronics

Assuming the 90 days horizon Nippon Light Metal is expected to generate 0.71 times more return on investment than Samsung Electronics. However, Nippon Light Metal is 1.41 times less risky than Samsung Electronics. It trades about -0.01 of its potential returns per unit of risk. Samsung Electronics Co is currently generating about -0.02 per unit of risk. If you would invest  945.00  in Nippon Light Metal on October 25, 2024 and sell it today you would lose (15.00) from holding Nippon Light Metal or give up 1.59% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.33%
Values	Daily Returns

Nippon Light Metal  vs.  Samsung Electronics Co

Nippon Light Metal

Risk-Adjusted Performance

0 of 100

Very Weak

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

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. In spite of comparatively stable basic indicators, Samsung Electronics is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Nippon Light and Samsung Electronics

The main advantage of trading using opposite Nippon Light and Samsung Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nippon Light 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 Nippon Light Metal 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.

Check out your portfolio center.

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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.