Correlation Between Samsung Electronics and Microchip Technology

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

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

Diversification Opportunities for Samsung Electronics and Microchip Technology

0.71

Correlation Coefficient

Samsung Electronics  Microchip Technology

Poor diversification

The 3 months correlation between Samsung and Microchip is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Samsung Electronics Co and Microchip Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microchip Technology and Samsung Electronics 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 Samsung Electronics Co are associated (or correlated) with Microchip Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microchip Technology has no effect on the direction of Samsung Electronics i.e., Samsung Electronics and Microchip Technology go up and down completely randomly.

Pair Corralation between Samsung Electronics and Microchip Technology

Assuming the 90 days trading horizon Samsung Electronics Co is expected to under-perform the Microchip Technology. But the stock apears to be less risky and, when comparing its historical volatility, Samsung Electronics Co is 1.1 times less risky than Microchip Technology. The stock trades about -0.19 of its potential returns per unit of risk. The Microchip Technology is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest  7,655  in Microchip Technology on September 5, 2024 and sell it today you would lose (1,014) from holding Microchip Technology or give up 13.25% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.46%
Values	Daily Returns

Samsung Electronics Co  vs.  Microchip Technology

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 uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Microchip Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Microchip Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Samsung Electronics and Microchip Technology

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

The idea behind Samsung Electronics Co and Microchip Technology 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.